Modernization of the Labeling and Advertising Regulations for Wine, Distilled Spirits, and Malt Beverages

Federal RegisterNov 26, 2018

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DEPARTMENT OF THE TREASURY

Alcohol and Tobacco Tax and Trade Bureau

27 CFR Parts 4, 5, 7, 14, and 19

[Docket No. TTB-2018-0007; Notice No. 176]

RIN 1513-AB54

Modernization of the Labeling and Advertising Regulations for Wine, Distilled Spirits, and Malt Beverages

AGENCY:

Alcohol and Tobacco Tax and Trade Bureau, Treasury.

ACTION:

Notice of proposed rulemaking.

SUMMARY:

The Alcohol and Tobacco Tax and Trade Bureau (TTB) is proposing to amend its regulations governing the labeling and advertising of wine, distilled spirits, and malt beverages. TTB proposes to reorganize and recodify these regulations in order to simplify and clarify regulatory standards, incorporate guidance documents and current policy into the regulations, and reduce the regulatory burden on industry members where possible.

DATES:

TTB must receive comments on this proposal on or before March 26, 2019.

ADDRESSES:

Please send your comments on this document to one of the following addresses:

•

Internet: https://www.regulations.gov

(via the online comment form for this document as posted within Docket No. TTB-2018-0007 at “

Regulations.gov

,” the Federal e-rulemaking portal);

•

U.S. Mail:

Director, Regulations and Rulings Division, Alcohol and Tobacco Tax and Trade Bureau, 1310 G Street NW, Box 12, Washington, DC 20005; or

•

Hand delivery/courier in lieu of mail:

Alcohol and Tobacco Tax and Trade Bureau, 1310 G Street NW, Suite 400, Washington, DC 20005.

See the Public Participation section of this document for specific instructions and requirements for submitting comments, and for information on how to request a public hearing.

FOR FURTHER INFORMATION CONTACT:

Christopher M. Thiemann or Kara T. Fontaine, Regulations and Rulings Division, Alcohol and Tobacco Tax and Trade Bureau, 1310 G Street NW, Box 12, Washington, DC 20005; telephone 202-453-2265.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background

A. TTB's Statutory Authority

B. Current TTB Alcohol Beverage Labeling and Advertising Regulations

C. The Certificate of Label Approval (COLA) Process

D. Modernization of the Alcohol Beverage Labeling and Advertising Regulations

E. Plain Language Principles

F. Scope of this Rulemaking

II. Proposed Revisions

A. General Reorganization of the Parts

B. Proposed Changes That Apply to Parts 4, 5 and 7

C. Proposed Changes Specific to 27 CFR Part 4 (Wine)

D. Proposed Changes Specific to 27 CFR Part 5 (Distilled Spirits)

E. Proposed Changes Specific to 27 CFR Part 7 (Malt Beverages)

F. Proposed 27 CFR Part 14 (Advertising)

G. Impact on Public Guidance Documents

H. Impact on Current Labels

III. Derivation Tables for Proposed Parts 4, 5, 7, and 14

IV. Public Participation

A. Comments Sought

B. Submitting Comments

C. Confidentiality

D. Public Disclosure

V. Regulatory Analyses and Notices

A. Regulatory Flexibility Act

B. Executive Order 12866

C. Paperwork Reduction Act

VI. Drafting Information

List of Subjects

Authority and Issuance

I. Background

A. TTB's Statutory Authority

Sections 105(e) and 105(f) of the Federal Alcohol Administration Act (FAA Act), 27 U.S.C. 205(e) and 205(f), set forth standards for the regulation of the labeling and advertising of wine, distilled spirits, and malt beverages. The FAA Act was enacted in 1935 and also contains provisions regarding the requirements for basic permits that allow people to engage in business as producers, importers, and wholesalers, and the regulation of unfair trade practices.

The Alcohol and Tobacco Tax and Trade Bureau (TTB) administers the FAA Act pursuant to section 1111(d) of the Homeland Security Act of 2002, codified at 6 U.S.C. 531(d). The Secretary of the Treasury (the Secretary) has delegated various authorities to administer and enforce this law to the TTB Administrator through Treasury Department Order 120-01 (dated December 10, 2013, superseding Treasury Order 120-01 (Revised), “Alcohol and Tobacco Tax and Trade Bureau,” dated January 24, 2003).

1. History of the FAA Act

After the repeal of Prohibition by the enactment of the Twenty-First Amendment in 1933, the alcohol beverage industry was subject to Federal regulation under the codes of fair competition authorized by the National Industrial Recovery Act. By Executive order, the President created the Federal Alcohol Control Administration to administer the codes of fair competition for the alcohol beverage industry. In 1935, the Supreme Court struck down the provisions of the National Industrial Recovery Act as unconstitutional. See

Schechter Poultry Corp.

United States,

295 U.S. 495 (1935). After that decision, in order to provide for the orderly regulation of the alcohol beverage industry, Congress enacted the FAA Act in August of 1935.

The legislative history of the FAA Act provides some insight concerning the general purpose of the FAA Act's labeling provisions, which authorize TTB to regulate the labeling of alcohol beverage products:

* * * the provisions of this bill show that the purpose was to carry that regulation into certain particular fields in which control of interstate commerce in liquors was paramount and necessary. The purpose was to provide such regulations, not laid down in statute, so as to be inflexible, but laid down under the guidance of Congress, under general principles, by a body which could change them as changes were found necessary. Those regulations were intended to insure that the purchaser should get what he thought he was getting, that representations both in labels and in advertising should be honest and straight-forward and truthful. They should not be confined, as the pure-food regulations have been confined, to prohibitions of falsity, but they should also provide for the information of the consumer, that he should be told what was in the bottle, and all the important factors which were of interest to him about what was in the bottle. (See Hearings on H.R. 8539 before the Committee on Ways and Means, House of Representatives, 74th Cong., 1st Sess. 10 (1935).)

2. Labeling and Advertising Provisions of the FAA Act

Section 105(e) of the FAA Act, codified in the United States Code at 27 U.S.C. 205(e), sets forth requirements for labeling of wine (which is defined in the FAA Act to cover only wines that contain at least 7 percent alcohol by volume), distilled spirits, and malt beverages (collectively referred to as “alcohol beverages” throughout this document). This section of the FAA Act authorizes the Secretary to issue regulations to prevent deception of the consumer, to provide the consumer with “adequate information” as to the identity and quality of the product, to prohibit false or misleading statements, and to provide information as to the alcohol content of the product.

3. FAA Act Prohibition of Sale or Shipment of Mislabeled Products

Section 105(e) of the FAA Act (27 U.S.C. 205(e)) also prohibits the sale or

shipment in interstate or foreign commerce of wine, distilled spirits, or malt beverages that are not bottled, packaged, and labeled in accordance with regulations issued by the Secretary. Violations of section 105(e) are misdemeanors that are punishable by a fine. See 27 U.S.C. 207.

The prohibition in section 105(e) applies to any person engaged in business as a distiller, brewer, rectifier, blender, or other producer, or as an importer or wholesaler of wine, distilled spirits or malt beverages, or as a bottler, or warehouseman and bottler, of distilled spirits. The law makes it unlawful for such persons, directly or indirectly or through an affiliate, to sell or ship, or deliver for sale or shipment, or otherwise introduce, in interstate or foreign commerce, or to receive therein, or to remove from customs custody for consumption, any wine, distilled spirits, or malt beverages in bottles, unless the products are bottled, packaged, and labeled in conformity with the regulations.

4. Authorization of Labeling Regulations in the FAA Act

The FAA Act provides specific guidance as to what the labeling regulations should cover, but builds in a “zone of discretion” for TTB to exercise in implementing these regulations. See

Center for Science in the Public Interest

Department of the Treasury,

797 F.2d 995 (D.C. Cir. 1986). The following provides a summary of the statutory provisions with regard to the labeling of wine, distilled spirits, and malt beverages under section 105(e) of the FAA Act (27 U.S.C. 205(e)).

a. Prohibition of consumer deception.

Section 105(e)(1) of the FAA Act (27 U.S.C. 205(e)(1)) authorizes the issuance of regulations that prohibit deception of the consumer with respect to such products or the quantity thereof, and prohibit, irrespective of falsity, such statements relating to age, manufacturing processes, analyses, guarantees, and scientific or irrelevant matters that the Secretary finds to be likely to be misleading to the consumer. This section provides the basis for many of TTB's regulations on prohibited practices with respect to labeling statements.

b. Adequate information as to the identity, quality, and alcohol content of products, as well as the net contents and the manufacturer/bottler/importer.

Section 105(e)(2) of the FAA Act (27 U.S.C. 205(e)(2)) authorizes the issuance of regulations to ensure that labels provide the consumer with adequate information as to the identity and quality of the product, the alcohol content thereof, the net contents of the package, and the manufacturer or bottler or importer of the product. This section provides the basis for most of the mandatory information requirements in the TTB labeling regulations.

With regard to alcohol content, section 105(e)(2) sets out different requirements for wine, distilled spirits, and malt beverages. This section provides the Secretary with the authority to issue regulations that require alcohol content statements on labels of distilled spirits products and for wines with an alcohol content of over 14 percent alcohol by volume, leaving such statements optional for wines with an alcohol content at or below 14 percent. Furthermore, the FAA Act contains language that specifically prohibits placement of alcohol content statements on malt beverage labels, unless required by State law. In 1995, that statutory ban was struck down on First Amendment grounds by the U.S. Supreme Court in

Rubin

Coors Brewing Co.,

514 U.S. 476 (1995) (hereinafter referred to as the “

Coors”

decision).

c. Statement of neutral spirits.

Section 105(e)(3) of the FAA Act (27 U.S.C. 205(e)(3)) authorizes the issuance of regulations that require an accurate statement in the case of distilled spirits (other than cordials, liqueurs, and specialties) produced by blending or rectification, if neutral spirits have been used in the production thereof, informing the consumer of the percentage of neutral spirits so used and of the name of the commodity from which such neutral spirits have been distilled, or in the case of neutral spirits or of gin produced by a process of continuous distillation, the name of the commodity from which distilled. These very specific statutory provisions are incorporated into the TTB distilled spirits labeling regulations.

d. Prohibition of statements that are disparaging, false, misleading, obscene, or indecent.

Section 105(e)(4) (27 U.S.C. 205(e)(4)) authorizes the issuance of regulations to prohibit labeling statements that are disparaging of a competitor's products or are false, misleading, obscene or indecent. This provision is reflected in TTB's current regulations on prohibited practices.

e. Prohibition of implied endorsements that are false or misleading.

Section 105(e)(5) (27 U.S.C. 205(e)(5)) authorizes the issuance of regulations that prevent deception of the consumer by use of a trade or brand name that is the name of any living individual of public prominence, or existing private or public organization, or is a name that is in simulation or an abbreviation thereof, and will prevent the use of a graphic, pictorial, or emblematic representation of any such individual or organization, if the use of such name or representation is likely to falsely lead the consumer to believe that the product has been endorsed, made or used by, or produced for, or under the supervision of, or in accordance with the specifications of, such individual or organization. Certain “grandfathering” provisions are included in this section. These provisions are incorporated into the current regulations on prohibited practices.

5. Prohibition of Alteration, Mutilation, Destruction, Obliteration, or Removal of Labels

Section 105(e) makes it unlawful for any person to alter, mutilate, destroy, obliterate, or remove any mark, brand, or label upon wine, distilled spirits, or malt beverages held for sale in interstate or foreign commerce or after shipment therein. An exception is made where the activity is authorized by Federal law. The FAA Act also authorizes the Secretary to issue regulations authorizing relabeling for the purposes of compliance with the requirements of section 105(e) or of State law. These regulations are found in parts 4, 5 and 7 of 27 CFR.

6. Certificate of Label Approval Requirements

Section 105(e) of the FAA Act sets out very specific requirements for the issuance of certificates of label approval (COLAs) by the Secretary. The law provides that “[i]n order to prevent the sale or shipment or other introduction of distilled spirits, wine, or malt beverages in interstate or foreign commerce, if bottled, packaged, or labeled in violation of the requirements of this subsection,” certain persons are required to obtain a COLA prior to bottling distilled spirits, wine, or malt beverages.

The persons covered by this requirement under the law are bottlers of distilled spirits; producers, blenders, and wholesalers of wine, and proprietors of a bonded wine storeroom; and brewers and wholesalers of malt beverages. With regard to imported products, the law provides that no person shall remove from customs custody, in bottles, for sale or any other commercial purpose, distilled spirits, wine, or malt beverages, without first obtaining a COLA. The law provides that such COLAs are to be issued in such manner and form as the Secretary shall prescribe by regulations.

The law goes on to allow for the issuance of certificates of exemption,

pursuant to regulations issued by the Secretary, when an applicant has shown to the satisfaction of the Secretary that the wine, distilled spirits, or malt beverages to be bottled by the applicant are not to be sold, or offered for sale, or shipped or delivered for shipment, or otherwise introduced, in interstate or foreign commerce. The law provides for the issuance of these certificates to bottlers of distilled spirits; producers, blenders, or wholesalers of wine, or proprietors of a bonded wine storeroom; and brewers and wholesalers of malt beverages. However, the law does not authorize the issuance of certificates of exemption to persons removing alcohol beverages in containers from customs custody, presumably because those products will by definition be introduced in interstate or foreign commerce.

7. Advertising Provisions of the FAA Act

Section 105(f) of the FAA Act (27 U.S.C 205(f)) provides similar authority to the Secretary to prescribe regulations with respect to the advertising of wine, distilled spirits, and malt beverages.

The Secretary is authorized to prescribe regulations that will prevent deception of the consumer and to prohibit, irrespective of falsity, such statements relating to age, manufacturing processes, analyses, guarantees, and scientific or irrelevant matters that the Secretary finds to be likely to mislead the consumer. See 27 U.S.C. 205(f)(1). The Secretary is also authorized to prescribe regulations to ensure that advertisements provide the consumer with adequate information as to the identity and quality of the products advertised, the alcohol content thereof, and the person responsible for the advertisement. See 27 U.S.C. 205(f)(2). The statute bans alcohol content statements on advertisements of both wine and malt beverages; this provision was not the subject of the Supreme Court's decision in

Coors.

The FAA Act contains advertising provisions that are very similar to the labeling provisions with regard to disclosure of neutral spirits (27 U.S.C. 205(f)(3)) and the prohibition of statements that are disparaging, false, misleading, obscene, or indecent (27 U.S.C. 205(f)(4)). The FAA Act also authorizes the issuance of regulations to prevent advertising statements that are inconsistent with any statement on the labeling of the products advertised. (27 U.S.C. 205(f)(5)).

8. Special Rules for Malt Beverages Under the FAA Act

The statutory requirements for malt beverages under the FAA Act differ from the requirements for distilled spirits and wine. Most notably for purposes of this document, the labeling provisions of the FAA Act apply to the labeling of malt beverages sold or shipped or delivered for shipment or otherwise introduced into or received in any State from any place outside of that State “only to the extent that the law of such State imposes similar requirements with respect to the labeling” of malt beverages sold within that State. See 27 U.S.C. 205(f).

The penultimate paragraph of section 105(f) also provides that the advertising provisions of the FAA Act apply to the advertising of malt beverages intended to be sold or shipped or delivered for shipment or otherwise introduced into or received in any State from any place outside of that State, only to the extent that the law of that State imposes “similar requirements” with respect to the advertising of malt beverages to be sold within that State.

9. Alcoholic Beverage Labeling Act (ABLA)

The Alcoholic Beverage Labeling Act of 1988 (ABLA) requires that a specific health warning statement appear on the labels of all containers of alcohol beverages for sale or distribution in the United States. See 27 U.S.C. 215. This requirement applies to both interstate and intrastate sale and distribution of alcoholic beverages. In addition, the health warning statement must appear on containers of alcoholic beverages that are sold, distributed, or shipped to members or units of the U.S. Armed Forces, including those located outside the United States.

The health warning statement required by ABLA advises consumers of the risks of birth defects to pregnant women, impairment of the ability to operate a car or other machinery, and other potential health problems resulting from the consumption of alcoholic beverages. As stated in 27 U.S.C. 213:

The Congress finds that the American public should be informed about the health hazards that may result from the consumption or abuse of alcoholic beverages, and has determined that it would be beneficial to provide a clear, nonconfusing reminder of such hazards, and that there is a need for national uniformity in such reminders in order to avoid the promulgation of incorrect or misleading information * * *.

ABLA provides that no State may require any statement concerning alcoholic beverages and health, other than the required health warning statement, on any alcoholic beverage container, box, carton, or other package that contains such a container. See 27 U.S.C. 216.

This proposed rule does not affect ABLA labeling requirements.

10. Internal Revenue Code Marking Requirements

In addition to the FAA Act and ABLA, Chapter 51 of the Internal Revenue Code of 1986 (IRC), (26 U.S.C. 5001

et seq.

), sets forth certain marking requirements for alcohol beverage products. Chapter 51 of the IRC imposes Federal excise taxes on beer, wine, and distilled spirits, and provides for the regulation of alcohol beverages to protect the revenue associated with those taxes. The tax rates differ depending on the product, and the marking requirements provide for the proper determination of tax liability based on the identity of the product.

This proposed rule does not amend IRC labeling requirements. However, some IRC labeling regulations require compliance with certain FAA Act labeling regulations by cross-referencing labeling provisions in 27 CFR parts 4, 5 or 7, as applicable.

B. Current TTB Alcohol Beverage Labeling and Advertising Regulations

1. History

The first regulations implementing the labeling and advertising provisions of the FAA Act were promulgated in 1936 by the Federal Alcohol Administration (FAA). Over the next several decades, various amendments to these regulations were published by TTB's other predecessor agencies, the Internal Revenue Service (IRS), and the Bureau of Alcohol, Tobacco and Firearms (ATF). TTB assumed responsibility for the enforcement and implementation of these regulations in January of 2003, pursuant to the Homeland Security Act of 2002.

2. FAA Act-Based Regulations

The TTB regulations that implement the labeling and advertising provisions of the FAA Act, as they relate to wine, distilled spirits, and malt beverages, are set forth in chapter I of title 27 of the Code of Federal Regulations (27 CFR chapter I). Specifically, these regulations are codified in 27 CFR part 4, Labeling and Advertising of Wine (27 CFR part 4); 27 CFR part 5, Labeling and Advertising of Distilled Spirits (27 CFR part 5); and 27 CFR part 7, Labeling and Advertising of Malt Beverages (27 CFR part 7).

a. Mandatory and prohibited labeling information.

The TTB regulations

contained in 27 CFR parts 4, 5, and 7 require that all wine, distilled spirits, and malt beverages sold or shipped in, or otherwise introduced into, interstate commerce bear labels that contain certain mandatory information. The regulations also set conditions on the use of certain non-mandatory information and specifically prohibit labeling statements that are false or tend to create a misleading impression.

Provisions in parts 4, 5, and 7 currently require similar mandatory information to appear on labels of wine, distilled spirits, and malt beverages, with some exceptions and with some notable differences among the commodities. The regulations in some circumstances also contain provisions regarding the placement of the mandatory information. Commodity-specific rules are discussed more fully in later sections of this document, but a general description of the current labeling requirements is provided here.

The mandatory information that must appear on alcohol beverage labels includes such things as the brand name of the product; a statement of the class, type, or other designation of the product; the name and address of the bottler or importer; a statement of the net contents; and declarations relating to sulfites or added colors in the product. Alcohol content statements, expressed as a percentage of alcohol by volume, are required for distilled spirits, wine over 14 percent alcohol by volume, and certain flavored malt beverages. These requirements, as well as certain exceptions to these requirements, are set forth later in this preamble.

With regard to the class, type, or other designation, the regulations specify and describe 9 “classes” of wine, including “grape wine” and “fruit wine,” and 12 “classes” of distilled spirits, including “whisky” and “brandy.” Some classes are further subdivided into “types.” For example, types of “grape wine” include “table wine” and “dessert wine,” while types of whisky include “bourbon whisky” and “blended whisky.” For malt beverages, the TTB regulations refer to certain classes but do not provide specific standards of identity for those classes. Instead, the regulations provide that statements of class and type must “conform to the designation of the product as known to the trade.”

If a wine or distilled spirit does not fall within any class, and if a malt beverage is not known to the trade under a particular designation, the regulations require that a truthful and adequate statement of composition appear on the label as the statement of class and type. While the term “statement of composition” is not currently defined in the regulations, TTB's general policy has been to require that such a statement identify the base product and any added flavoring or coloring materials. For example, a statement of composition may be “grape wine with raspberry flavor added,” “a blend of vodka and coconut liqueur,” or “ale brewed with watermelon juice.”

As noted above, the “net contents” must appear on containers. This is required for all three commodities. TTB regulations provide standards of fill for wine and distilled spirits products but not for malt beverages. This means that the net contents of wine and distilled spirits containers must be consistent with specified quantities prescribed by the standards of fill requirements (such as 750 milliliters).

Certain types of information or representations are prohibited from appearing on alcohol beverage labels, and these are set forth in regulations entitled “prohibited practices.” See current 27 CFR 4.39, 5.42, and 7.29, for wine, distilled spirits, and malt beverages, respectively. Some labeling practices are prohibited outright on alcohol beverage labels for any of the commodities. For example, no false or obscene statement may appear on any alcohol beverage label or container. Other practices are prohibited if presented in a manner that is misleading.

Some practices may be prohibited for just one of the commodities. For example, existing regulations prohibit certain uses of the term “pure” on distilled spirits labels. Other labeling practices may be used on labels if they comply with certain rules. These include the use of a living person's name or likeness and statements making claims about whether the product is organic.

b. Alcohol advertising regulations.

TTB also promulgates regulations covering the advertising of wine, distilled spirits, and malt beverages. These regulations prescribe mandatory information that must be included in an advertisement (such as identification of the responsible party) and also prohibit certain practices similar to the prohibited practices for labels. The advertising regulations are currently found in subpart G of part 4, subpart H of part 5, and subpart F of part 7.

3. TTB's ABLA-Based Regulations

As previously noted, all alcohol beverages bottled or imported for sale or distribution in the United States must bear the health warning statement required by the ABLA, even if the product is not sold in interstate commerce. The regulations promulgated under the authority of the ABLA are set forth in 27 CFR part 16, Alcoholic Beverage Health Warning Statement (27 CFR part 16). As noted above, this proposal does not affect ABLA labeling requirements.

4. TTB's IRC Marking Regulations

Finally, regulations implementing the IRC marking requirements appear in 27 CFR parts 19, 24, and 25 (relating to, respectively, domestic producers and bottlers of distilled spirits, wines, and beer), as well as 27 CFR parts 26, 27, and 28 (relating to distilled spirits, wine, and beer that are, respectively, brought into the United States from Puerto Rico and the Virgin Islands, imported into the United States, and exported from the United States). As noted above, this proposal does not affect these IRC-based regulations.

C. The Certificate of Label Approval (COLA) Process

As noted above, a person who intends to bottle wine, distilled spirits, or malt beverages, or remove those products from customs custody in bottles, for introduction into interstate or foreign commerce must, before doing so, obtain approval of the labels for the bottles through a COLA issued by TTB. Currently, each application for a COLA is reviewed by a TTB specialist for compliance with the FAA Act and TTB regulations. In fiscal year 2015, TTB received over 153,000 applications for label approval. The time between the date of application and final TTB determination on the application averaged approximately 24 days.

In part, the increase in the number of COLA applications is due to the growing number of industry members submitting applications and to product innovations and expansions in product lines by industry members. In addition, because industry members seek to bring products to market quickly, they may submit label approval applications early in their product development process, before the product and its marketing have been finalized. These industry members may submit several applications for different potential labels to cover the different possible ways that product may eventually be formulated and marketed once ready for market.

To implement the FAA Act provision requiring the issuance of COLAs, TTB regulations provide a process through which a person can submit an application for approval of a label, along with a copy of the label, and obtain TTB approval of the label through the

issuance by TTB of a COLA. The COLA is evidence that a label has been reviewed for compliance with the TTB regulations and approved for use. The requirement to obtain a COLA for domestic and imported products is set forth in subparts E and F of part 4 (for wine), subparts E and F of part 5 (for distilled spirits), and subparts D and E of part 7 (for malt beverages). The procedures governing the issuance and revocation of COLAs are set forth in 27 CFR part 13, Labeling Proceedings (27 CFR part 13).

The regulations also authorize the issuance of certificates of exemption for wine and distilled spirits when the applicant establishes that the wine or distilled spirits product is not to be sold, offered for sale, or shipped or delivered for shipment, or otherwise introduced in interstate or foreign commerce. It should be noted that TTB and its predecessor agencies have never issued regulations requiring certificates of exemption for malt beverages that will not be sold or otherwise introduced in interstate or foreign commerce. Furthermore, the regulations do not require malt beverages that will not be sold or otherwise introduced in interstate or foreign commerce to be covered by a certificate of label approval. See TTB Ruling 2013-1. This issue will be discussed later in this preamble.

1. COLA Streamlining Initiatives

TTB has undertaken several initiatives to streamline the label approval process. In 2003, TTB implemented COLAs Online, a system that allows industry members to submit electronic applications for label approval. Currently, over 90 percent of COLA applications are submitted and processed electronically. More recently, in 2013, TTB began electronically processing applications that are received on paper.

On July 5, 2012, TTB published a revised version of TTB Form 5100.31, “Application for and Certification/Exemption of Label/Bottle Approval.” The most significant change was to expand the list of items that may be changed on an approved alcohol beverage label without resubmission of the label for TTB approval. This new policy, which is reflected on the form, reduces the number of label applications that industry members would otherwise send to TTB. As a result, label applications were reduced by 8 percent. In 2014 TTB expanded the list of changes that may be made to approved labels without requiring those labels to be resubmitted to TTB for review—this expanded list has been incorporated into the form (see TTB Industry Circular 2014-02 and TTB F 5100.31).

TTB has also been working on additional initiatives to streamline label review. These include making processing improvements designed to speed up review turnaround times; updating labeling guidance on the TTB website (

https://www.ttb.gov

) to help industry members comply with its labeling requirements; and researching industry needs and studying other Federal agencies' best practices so that TTB can continue to improve its label review process in the future.

D. Modernization of the Alcohol Beverage Labeling and Advertising Regulations

As part of the Department of the Treasury's “Plan for Retrospective Analysis of Existing Rules,” TTB has been reviewing its existing labeling and advertising of wine, distilled spirits, and malt beverages regulations. TTB proposes to amend these regulations to improve their clarity and readability, to improve compliance, and to ease burdens on the regulated industry. The amended regulations will take into account modern business practices and contemporary consumer understanding in order to modernize the regulations.

In this proposed rule, TTB intends to clarify, update, and consolidate labeling requirements and, where possible, to set forth objective standards for meeting those requirements. This effort also will help TTB use its limited resources more efficiently, facilitate the development and use of more efficient systems for processing applications, and reduce the processing time for label applications.

In preparation for this rulemaking, TTB reviewed its regulations, public guidance, and labeling review practices to identify policies and interpretations that are relevant but have not yet been codified in the regulations, as well as those that are no longer relevant and can be eliminated. In all, TTB reviewed 90 rulings and industry circulars, and incorporated all or parts of approximately 38 of them into the proposed regulations. When these proposed regulations become final, those rulings and industry circulars, or parts thereof, will be superseded by the regulations. TTB also determined that eight rulings and industry circulars were no longer relevant and thus could be superseded without being incorporated.

As a result, the proposed regulations, when finalized, will provide industry with a more comprehensive source for the general rules applicable to alcohol beverage labeling. In addition, in updating these regulations, TTB sought to make the rules applicable to all three commodities as consistent as possible, recognizing that some differences in treatment are required by statute and others by the nature of the commodity or industry practice.

E. Plain Language Principles

On June 1, 1998, the President issued a memorandum that requires Federal agencies to write regulations in “plain language.” These proposed regulations have been written in the plain language style. The proposed regulations:

• Use the active voice in the regulations, whenever possible;

• Use shorter sentences, paragraphs, and sections;

• Minimize the use of jargon and unnecessary technical terms;

• Clarify and simplify the regulatory requirements;

• Create consistency in the treatment of the three commodities, as appropriate;

• Break large sections into smaller, more focused sections for better readability; and

• Make it easier for readers to find information through the tables of contents.

F. Scope of This Rulemaking

As mentioned above, TTB is undertaking this modernization effort to improve understanding of the regulatory requirements and to make compliance easier and less burdensome. In addition, the proposed rule will incorporate changes in labeling standards that have come about through statutory changes (such as the change to the labeling of wines with semi-generic designations) and international agreements (through the incorporation of various designations of geographic significance). In the case of wine, we are proposing greater flexibility in the use of certain appellations of origin and multiple varietal designations, both to comply with international commitments and to provide more information to consumers through greater flexibility in the use of this optional information on labels. For all products, TTB is proposing greater flexibility with regard to the placement of mandatory information on labels.

TTB is also reflecting contemporary case law with regard to the protection of commercial speech under the First Amendment. In some cases, this means codifying longstanding interpretations, such as our policy that the prohibition on disparaging statements on labels and in advertisements does not prohibit truthful and accurate comparisons with a competitor's product.

With regard to malt beverages and wine, TTB is updating the alcohol content regulations for the first time since the Supreme Court's decision in

Rubin

Coors Brewing Company,

514 U.S. 476 (1995), which struck down on First Amendment grounds the FAA Act's ban on alcohol content statements on malt beverage labels. In 1993, after the district court decision in the

Coors

case but prior to the Supreme Court decision, TTB's predecessor agency, the Bureau of Alcohol, Tobacco and Firearms (ATF), issued interim regulations allowing optional statements of alcohol content on malt beverage labels. See T.D ATF-339 (58 FR 21228, April 19, 1993). TTB is now proposing to finalize updated alcohol content regulations, including, in this document, amendments that would modernize the regulations on strength claims to remove outdated language, such as the ban on use of the term “pre-war strength,” which refers to the period before World War I.

This proposed rule would also incorporate certain proposals previously aired for comment by TTB in notices or advance notices of proposed rulemaking, including proposals on the use of “estate grown” on wine labels, and the use of aggregate packaging to satisfy standards of fill for distilled spirits and wine containers.

TTB is also proposing several amendments that would protect consumers by providing certain more specific labeling and packaging rules. For example, existing regulations require mandatory information to appear on opaque packaging of distilled spirits and wine, because consumers are unable to see the label on the container without removing the container from the packaging. TTB is proposing to extend this requirement to malt beverages.

TTB is also proposing to require mandatory information to appear on any “closed packaging” of wine, distilled spirits, or malt beverages. The proposed amendments define closed packaging to include packaging where the mandatory information on the label of the container is not visible to the consumer because the container cannot be readily removed from the packaging. Packaging is considered closed if the consumer must open, rip, untie, unzip, or otherwise manipulate the package to remove the container in order to view any of the mandatory information.

TTB has noted that today's industry increasingly uses terms that apply to one commodity on labels of a different commodity. For example, TTB sees many wine and malt beverage labels that include distilled spirits terms or malt beverage labels that include wine terms. TTB is proposing a specific regulatory provision to prohibit the use of such terms when they might mislead consumers as to the identity of the product, while allowing the non-misleading use of certain terms (such as references to aging malt beverages in barrels previously used for the storage of distilled spirits or wine).

TTB solicits comments on whether these proposals will protect consumers and whether they will require significant labeling changes by industry members. TTB proposes to give all affected parties three years to come into compliance with the proposed regulations, should they be finalized. This will allow industry members to coordinate new labeling requirements with scheduled labeling changes, and to use up existing stocks of labeling and packaging.

There are a number of ongoing rulemaking initiatives related to labeling and advertising of alcohol beverages that will be handled separately from this proposed rule due to their complexity. For example, this document does not deal with “Serving Facts” statements, an issue that was the subject of a 2007 notice of proposed rulemaking (see Notice No. 73, 72 FR 41860, July 31, 2007) and TTB Ruling 2013-2. Nor does TTB address its current policy requiring statements of average analysis on labels that include nutrient content claims. Industry members should continue to rely on TTB's published rulings and other guidance documents on these issues. TTB's policy on gluten content statements is still an interim one; therefore, that issue is not addressed in the proposed rule (see TTB Ruling 2014-2). Substantive changes to allergen labeling requirements are not addressed in this document. Standards of fill requirements are not addressed in this document but TTB plans to address them in a separate rulemaking document.

In addition, this document is not intended to specifically address proposals that were submitted to the Department of the Treasury in response to a Request for Information (RFI) published in the

Federal Register

(82 FR 27212) on June 14, 2017. The RFI invited members of the public to submit views and recommendations for Treasury Department regulations that can be eliminated, modified, or streamlined, in order to reduce burdens. The comment period for the RFI closed on October 31, 2017.

Eight comments on the FAA Act labeling regulations, including 28 specific recommendations, were submitted in response to the RFI. For ease of reference, TTB will post the labeling comments in the docket for this rulemaking. We will consider all of the labeling recommendations submitted in response to the RFI either as comments to this proposed rule or as suggestions for separate agency action, as appropriate. We note that our preliminary review of the comments submitted in response to the RFI indicates that many of the topics that were included in those recommendations are addressed in this proposed rule, although our proposals may in some cases differ from those set forth in the comments.

Finally, in this notice TTB proposes to consolidate its alcohol beverage advertising regulations in a new part, 27 CFR part 14, Advertising of Wine, Distilled Spirits, and Malt Beverages. The proposed part 14 contains only those updates needed to conform certain regulated practices to the updates being proposed for the labeling provisions. Additional updates to the regulations on advertising to address contemporary issues, such as social media, are not proposed in this rulemaking but may be proposed in future rulemaking initiatives. Because this proposed rule deals with such a broad scope of modernization changes, TTB will deal with these more specific issues in separate rulemaking documents.

II. Proposed Revisions

A. General Reorganization of the Parts

TTB is proposing to reorganize the contents of 27 CFR parts 4, 5, and 7, and to add a new 27 CFR part 14. As proposed, 27 CFR parts 4, 5, and 7 continue to contain the labeling regulations for wine, distilled spirits, and malt beverages, respectively, while the current subparts of parts 4, 5, and 7 that relate to advertising are removed from those parts and consolidated into a new part 14. As part of TTB's review of the labeling regulations, TTB reviewed the various sections and subparts and determined that much of their basic structure needs to be amended. Under the current structure, information is not always located where a reader would expect to find it. As a result of amendments to the regulations over the years, certain provisions that would logically be grouped together are instead spread throughout a given part. Accordingly, TTB is proposing to group topics together in a more logical order, with related provisions, where appropriate, appearing in a single subpart.

The new subparts are restructured in a progressive order starting with general provisions, such as defining the terms

used in that part and specifying who is subject to the regulations in that part. The “general provisions” subpart is followed by subparts setting forth the circumstances under which a certificate of label approval (COLA) is required, how to obtain a COLA, and what information is required on the labels and where it must appear.

Proposed parts 4, 5, and 7 of 27 CFR are each structured similarly. Furthermore, within each part, regulatory provisions that appear in more than one part will have the same number within the part. For example, the regulations that set out the mandatory information for wine, distilled spirits, and malt beverage labels, respectively, are found in proposed §§ 4.63, 5.63, and 7.63. TTB believes that this revised numbering of the regulations will make it easier for the public to find relevant regulations and to compare regulations in the three parts.

The table below shows the organization of the proposed subparts in parts 4, 5, and 7.

Proposed Subparts: 27 CFR Parts 4, 5, and 7

Part 4 (Wine)

Part 5 (Distilled spirits)

Part 7 (Malt beverages)

Subpart A—General Provisions

Subpart B—Certificates of Label Approval and Certificates of Exemption from Label Approval

Subpart B—Certificates of Label Approval

Subpart C—Alteration of Labels, Relabeling, and Adding Information to Containers

Subpart D—Label Standards

Subpart E—Mandatory Label Information

Subpart F—Restricted Labeling Statements

Subpart G—Prohibited Labeling Practices

Subpart H—Labeling Practices That are Prohibited if They are Misleading

Subpart H— Labeling Practices That are Prohibited if They are Misleading

Subpart I—Standards of Identity for Wine

Subpart I—Standards of Identity for Distilled Spirits

Subpart I—Classes and Types of Malt Beverages

Subpart J—American Grape Variety Names

Subpart J—Formulas

Subpart J—Reserved

Subpart K—Standards of Fill and Authorized Container Sizes

Subpart K—Standards for Fill and Authorized Container Sizes

Subpart K—Reserved

Subpart L—Recordkeeping and Substantiation Requirements

Subpart M—Penalties and Compromise of Liability

Subpart N—Paperwork Reduction Act

B. Proposed Changes That Apply to Parts 4, 5 and 7

As discussed above, in proposing to update its labeling regulations, one of TTB's purposes has been to apply the same rules to wine, distilled spirits, and malt beverages, to the extent possible, as long as different treatment is not required by statute or by the nature of the commodity. Therefore, a number of the proposed changes to the regulations apply to parts 4, 5 and 7. These proposed changes are described below, in the general order in which they appear in the proposed regulations. See the discussion in sections II C, II D, and II E of this document for provisions specific to wine, distilled spirits, and malt beverages, respectively.

1. Subpart A—General Provisions

a. Definitions.

Proposed subpart A includes several sections of general applicability. These sections include definitions of terms used throughout these regulations, as well as sections cross-referencing other regulations that relate to the production and labeling of the alcohol beverage products at issue.

With regard to definitions, TTB is proposing to amend the sections in parts 4, 5, and 7 that define the terms used in those parts (proposed §§ 4.1, 5.1, and 7.1), to add definitions of the following terms: “brand name,” “certificate holder,” “certificate of exemption from label approval,” “certificate of label approval (COLA),” “distinctive or fanciful name,” and “net contents.”

The proposed rule defines the term “brand name” as the name under which a product or product line is sold. This definition is consistent with the current understanding of the term and with guidance provided in the Beverage Alcohol Manuals (BAMs), TTB P 5120.3, 5110.7, and 5130.3, for wine, distilled spirits, and malt beverages, respectively, which are guidance documents that provide the public with interpretations of some of TTB's labeling regulations.

The term “certificate holder” is used in the proposed text of parts 4, 5, and 7 to refer to industry members that have obtained a COLA, certificate of exemption from label approval, or distinctive liquor bottle approval from TTB. The proposed rule sets forth a definition of “certificate holder” for parts 4, 5, and 7 that is largely consistent with that definition of that term in part 13 of the TTB regulations (27 CFR part 13), which governs the issuance, denial, and revocation of COLAs. The definition of the term “certificate of exemption from label approval” is consistent with the definition already in part 13 of the TTB regulations.

The definition of the term “Certificate of label approval (COLA)” is derived from the definition set forth in part 13 of the TTB regulations, but includes some proposed revisions. The proposed definition is “A certificate issued on TTB Form 5100.31 that authorizes the bottling of wine, distilled spirits, and malt beverages, or the removal of bottled wine, distilled spirits, and malt beverages from customs custody for introduction into commerce, as long as the product bears labels identical to the labels appearing on the face of the certificate, or labels with changes authorized by TTB on the certificate or otherwise.” The current definition in part 13 recognizes that the COLA form itself authorizes certain allowable revisions to a label that may be made by the certificate holder without having to obtain TTB approval. The revisions made in the proposed definition specifically recognize that TTB may

authorize revisions in other ways, such as by issuing guidance on the TTB website.

The term “distinctive or fanciful name” currently refers to a term that must be used on a distilled spirits label, together with a truthful and adequate statement of composition, when a distilled spirits product does not fall within a class and type that is specified in the regulations or on a malt beverage label when a malt beverage is not known to the trade under a particular designation. A distinctive or fanciful name is optional on other distilled spirits or malt beverage products. A distinctive or fanciful name is also optional for a wine, whether or not it bears a statement of composition.

The proposed rule defines the term “distinctive or fanciful name,” which is used in proposed parts 4, 5, and 7. The term “distinctive or fanciful name” is defined as a descriptive name or phrase chosen to identify a product on the label. It does not include a brand name, class or type designation, statement of composition, or, in part 7 only, a designation known to the trade or consumers.

The proposed rule adds a definition of “net contents” in parts 4, 5, and 7. The “net contents” is the amount, by volume, of wine, distilled spirits, or malt beverages, respectively, held in a container. The net contents statement is mandatory labeling information.

The proposed regulations also include amendments to several definitions that appear in the current regulations. These changes reflect current TTB policy and are clarifying in nature.

The definition of the term “container” is amended in parts 4 and 7 and is added to part 5 to replace the definition of the term “bottle.” The proposed rule defines “container” in parts 4 and 7 as any can, bottle, box with an internal bladder, cask, keg, barrel, or other closed receptacle, in any size or material, that is for use in the sale of wine or malt beverages, respectively, at retail. Aside from editorial changes, this differs from the current definitions in that it specifically incorporates a box with an internal bladder, sometimes referred to as a “bag in a box.”

The term “container” will replace the term “bottle” in the part 5 regulations for distilled spirits and is defined as any can, bottle, box used to protect an internal bladder, cask, keg, or other closed receptacle, in any size or material, that is for use in the sale of distilled spirits at retail. TTB believes that the revised definition will make it clearer that containers of distilled spirits may be made in a variety of materials and sizes, and that the term is not restricted to traditional glass bottles. Because of the restrictions on the size of distilled spirits containers, the proposed definition does not include references to barrels. Furthermore, because there are prescribed standards of fill for both wine and distilled spirits, the definitions in parts 4 and 5 include a cross reference to those standard of fill regulations, to clarify that containers must be in certain sizes.

The proposed rule amends the definition of the term “interstate or foreign commerce” in parts 4, 5 and 7 to remove the provision that included commerce within any Territory as being interstate or foreign commerce. The FAA Act extends to the 50 States, the District of Columbia, and Puerto Rico. As set forth in the definitions in the FAA Act, the term “State” included a Territory and the District of Columbia, and the term “Territory” meant Alaska, Hawaii, and Puerto Rico. See 27 U.S.C. 211(a)(1). Since the enactment of the FAA Act in 1935, Alaska and Hawaii have become states. Furthermore, Puerto Rico is now a Commonwealth, which has affected the status of transactions that occur solely within Puerto Rico under the FAA Act. See ATF Ruling 85-5, which addressed this issue in the context of the trade practice regulations and relied, in part, on

Cordova & Simonpietri Insurance Agency, Inc.

Chase Manhattan Bank,

649 F. 2d 36 (1st Cir. 1981). Therefore, the proposed rule amends the definition of “interstate or foreign commerce” to remove the language indicating that commerce within Puerto Rico is interstate commerce.

The proposed rule amends the definition of the term “person” in all three parts by adding “limited liability company” to specifically reflect TTB's current position that limited liability companies fall under the definition of a “person.”

The proposed rule removes the term “advertisement” from the definition sections in parts 4, 5, and 7, because these parts will no longer provide substantive rules regarding advertisements. Instead, the proposed rule moves the regulations regarding advertisements to a new proposed part 14.

Finally, in this subsection and throughout parts 4 and 5, the proposed rule updates references to the IRC. The existing regulations include certain references to terms (such as “rectifier” or “bonded wine storeroom”) from previous versions of the IRC. These terms are no longer used in the current tax laws. The proposed rule updates these references to include terms that are currently used in the IRC.

b. General requirements and prohibitions under the FAA Act.

Proposed §§ 4.3, 5.3, and 7.3 set out the general requirements and prohibitions under the FAA Act. Proposed §§ 4.3(a), 5.3(a), and 7.3(a) summarize the general requirements regarding COLAs, as set forth in greater detail in subpart B. Proposed §§ 4.3(b), 5.3(b), and 7.3(b) similarly summarize the prohibition against alteration, mutilation, destruction, obliteration, or removal of labels, as set forth in greater detail in subpart C. Proposed §§ 4.3(c) and (d), 5.3(c) and (d), and 7.3(c) and (d) set out the general labeling requirements of this part, as set forth in greater detail in subparts D, E, F, G, H, and I. Finally, proposed §§ 4.3(e) and 5.3(e) summarize the general bottling and standards of fill requirements, which are set out in subpart K for wine and distilled spirits. (Malt beverages are not subject to standard of fill requirements.)

Proposed §§ 4.3(d), 5.3(d), and 7.3(d) also set out for the first time in the regulations TTB's position that in order to be labeled in accordance with the regulations in these parts, a container may not contain an adulterated alcohol beverage within the meaning of the Federal Food, Drug, and Cosmetic Act. It is TTB's longstanding position that adulterated distilled spirits, wines, and malt beverages are mislabeled within the meaning of the FAA Act, even if the bottler or importer of the product in question has obtained a COLA or an approved formula. See Industry Circular 2010-8, dated November 23, 2010. No adulterated distilled spirits, wines, or malt beverages can satisfy the labeling requirements of the FAA Act. Subject to the jurisdictional requirements of the FAA Act, mislabeled distilled spirits, wines, and malt beverages, including adulterated products, may not be sold or shipped, delivered for sale or shipment, or otherwise introduced or received in interstate or foreign commerce, or removed from customs custody for consumption, by a producer, importer, or wholesaler, or other industry member subject to 27 U.S.C. 205(e).

c. Exports in bond.

The current regulations exempting products for export from the labeling regulations under the FAA Act are somewhat inconsistent. In existing §§ 4.80 and 7.60, wine and malt beverages “exported in bond” are exempted from the requirements of those respective parts. However, current § 5.1, which is entitled “General,” provides that part 5 “does not apply to distilled spirits for export.”

TTB believes that the exemptions in all three parts should be consistent and should be restricted to exportations in

bond. In general, the bottler is required to obtain a COLA prior to removal of the product from the premises. Products that are removed subject to tax may subsequently be exported or may end up in the domestic market, and therefore are not exempted from the labeling requirements of the FAA Act.

Accordingly, proposed §§ 4.8, 5.8, and 7.8 provide that products exported in bond directly from a bonded wine premises, distilled spirits plant, or brewery, respectively, or from customs custody, are not subject to the regulations under these parts. The amendment clarifies that exportation in bond does not include exportation after wine, distilled spirits, or malt beverages have been removed for consumption or sale in the United States, with appropriate tax determination or payment. This is only a clarifying change in parts 4 and 7. With regard to part 5, TTB seeks comments on whether this proposed change will impact existing practices, and if so, what the impact will be.

d. Compliance with Federal and State requirements.

For the first time, parts 4, 5, and 7, will make clear that compliance with the requirements of the respective parts relating to the labeling and bottling of wine, distilled spirits and malt beverages does not relieve industry members from responsibility for complying with other applicable Federal and State requirements (see proposed §§ 4.9, 5.9, and 7.9).

These sections also provide that it remains the responsibility of the industry member to ensure that any ingredient used in the production of alcohol beverages complies fully with all applicable Food and Drug Administration (FDA) regulations pertaining to the safety of food ingredients and additives and that TTB may at any time request documentation to establish such compliance. In addition, these three sections provide that it remains the responsibility of the industry member to ensure that containers are made of suitable materials that comply with all applicable FDA health and safety regulations for the packaging of alcohol beverages for consumption and that TTB may at any time request documentation to establish such compliance.

It is TTB's longstanding position that its review of labels and formulas does not relieve the industry member from its responsibility to ensure compliance with applicable FDA regulations. See,

e.g.,

Industry Circular 2010-8, dated November 23, 2010, entitled “Alcohol Beverages Containing Added Caffeine,” in which TTB reminded industry members as follows:

* * * each producer and importer of alcohol beverages is responsible for ensuring that the ingredients in its products comply with the laws and regulations that FDA administers. TTB's approval of a COLA or formula does not imply or otherwise constitute a determination that the product complies with the [Federal Food, Drug, and Cosmetic Act], including a determination as to whether the product is adulterated because it contains an unapproved food additive.

See also Industry Circular 62-33. The instructions on the forms for formula approval repeat this message. Now, TTB is proposing to codify this position in the regulations.

e. Cross references to other regulations.

Proposed §§ 4.10, 5.10, and 7.10 are derived from current §§ 4.5, 5.2, and 7.4 and include an expanded list of regulations implemented by other Federal agencies of which industry members should be aware. While the list does not purport to be comprehensive, TTB believes it will be helpful to industry members.

2. Subpart B—Certificates of Label Approval (for Wine, Distilled Spirits and Malt Beverages) and Certificates of Exemption From Label Approval (for Wine and Distilled Spirits)

a. Certificates of label approval (COLAs) and certificates of exemption from label approval.

The regulations implementing the statutory requirement for (COLAs) (for wine, distilled spirits and malt beverages) and certificates of exemption (for wine and distilled spirits) are reorganized for clarity. The proposed regulations also set forth, for the first time, some of the things that a COLA does not do. Specifically, the proposed regulations provide that, among other things, a COLA does not confer trademark protection; relieve the certificate holder from its responsibility to ensure that all ingredients used in the production of wine, distilled spirits, or malt beverages comply with applicable requirements of the FDA with regard to ingredient safety; or relieve the certificate holder from liability for violations of the FAA Act, the ABLA, the IRC, or related regulations and rulings.

The proposed revisions reflect the longstanding policy of TTB and its predecessor agencies. Furthermore, the COLA form (TTB Form 5100.31, Application for and Certification/Exemption of Label/Bottle Approval), currently specifically provides that the issuance of a COLA does not confer trademark protection and does not relieve the applicant from liability for violations of the FAA Act, the ABLA, the IRC, or related regulations and rulings. TTB believes that these revisions will clarify this position for the public and industry members.

b. Certificates of exemption.

Proposed §§ 4.23 and 5.23 incorporate current regulatory requirements with regard to the issuance of certificates of exemption to bottlers of wine and distilled spirits. Consistent with the current regulations, the proposed rule provides that the bottler may obtain a certificate of exemption upon establishing, to the satisfaction of the appropriate TTB officer, that the wine or spirits to be bottled will be offered for sale only within the State in which bottled, and that they will not be sold, offered for sale, shipped or delivered for shipment, or otherwise introduced, in interstate or foreign commerce.

Consistent with the instructions for Item 18 that currently appear on the TTB Form 5100.31, the proposed regulations provide that, as a condition for receiving exemption from label approval, the label covered by a certificate of exemption must include the statement, “For sale in [name of State] only.” It should be noted that it is TTB's current practice to issue certificates of exemption conditioned on the applicant's agreement to add this statement to the container. Under the proposed regulations, TTB will require applicants to include this statement on a label submitted with the application for a certificate of exemption.

c. COLAs for Imported Wine, Distilled Spirits, and Malt Beverages.

Consistent with current regulations, proposed §§ 4.24, 5.24, and 7.24 provide that wine, distilled spirits, and malt beverages, imported in containers, are not eligible for release from customs custody for consumption unless the person removing the wine, distilled spirits, or malt beverages has obtained and is in possession of a COLA. The regulations, as amended by the final rule facilitating the use of the International Trade Data System (ITDS) (T.D. TTB-145, 81 FR 94186, December 22, 2016), require importers who file electronically to file with CBP the identification number assigned to the approved COLA. If the importer is not filing electronically, the importer must provide a copy of the COLA to CBP at the time of entry.

d. Administrative rules.

In proposed subpart B of parts 4, 5, and 7, several sections are grouped under the heading of “Administrative Rules.” These sections set forth requirements for presenting COLAs to government officials; submitting formulas, samples, and other documentation related to obtaining or using COLAs; and applying for and obtaining permission to use personalized labels.

The requirement that a certificate holder must present a COLA upon request by any duly authorized representative of the United States Government (at proposed §§ 4.27, 5.27, and 7.27) reflects current provisions (at current §§ 4.51, 5.55(c), and 7.42) but adds the provision that the COLA may be the original or a copy (including an electronic copy).

i. Formula requirements.

TTB currently has specific formula requirements for certain domestic products. These are found in parts 5 and 19 for distilled spirits, in part 24 for wine, and in part 25 for beer. However, TTB often finds it necessary to obtain more specific information about a product that is not otherwise subject to the formula requirements in connection with the COLA review process.

For many imported alcohol beverage products, TTB requires a product evaluation to determine whether a proposed label identifies the product in an adequate and non-misleading way. Pre-COLA product evaluation entails a review of a product's ingredients and formulation and also may include a laboratory analysis of the product. Laboratory analysis involves a chemical analysis of a product. Such pre-COLA product evaluations ensure that:

• No alcohol beverage contains a prohibited ingredient.

• Ingredients are used within limitations or restrictions prescribed by TTB or another Federal agency, as applicable.

• Appropriate tax and product classifications are made.

• Alcohol beverages labeled without a sulfite declaration contain less than 10 parts per million (ppm) of sulfur dioxide.

The type of pre-COLA product evaluation required for a particular product depends on that product's formulation and origin. Industry Circular 2007-4, “Pre-COLA Product Evaluation,” dated September 11, 2007, includes a list of the imported products for which TTB currently requires formulas and other pre-COLA analyses.

The Industry Circular also announced that TTB had developed a new form that may be submitted in lieu of the various forms and formats otherwise prescribed in the regulations for specific products. TTB developed the form, TTB F 5100.51, “Formula and Process for Domestic and Imported Alcohol Beverages,” to simplify the formula submission process and to provide a more consistent means of information collection across all commodity areas for both imported and domestic products. The Circular stated that TTB intended to pursue a regulatory change that will make use of this form mandatory, entirely replacing the various industry-specific forms and formats currently set forth in the TTB regulations. Until such a change occurs, this form may be used voluntarily as an alternate procedure. A producer or importer who wishes to use TTB F 5100.51 may submit that form in lieu of the forms prescribed in the regulations without first requesting approval from TTB to do so.

Current regulations in §§ 4.38(h), 5.33(g), and 7.31(d) authorize TTB to request more information about the contents of a wine, distilled spirits product or malt beverage, but the language in part 7 is different from the language in parts 4 and 5. Sections 4.38(h) and 5.33(g) provide that, upon request of the appropriate TTB officer, a bottler or importer must submit a full and accurate statement of the contents of any container to which labels are to be or have been affixed. The regulations in § 7.31(d) state that the appropriate TTB officer may require an importer to submit a formula for a malt beverage, or a sample of any malt beverage or ingredients used in producing a malt beverage, prior to or in conjunction with the filing of an application for a COLA.

TTB is proposing to standardize the regulatory language in parts 4, 5 and 7 on this issue. Accordingly, proposed §§ 4.28, 5.28, and 7.28 provide that the appropriate TTB officer may require a bottler or importer to submit a formula, the results of laboratory testing, and samples of the product or ingredients used in the final product, prior to or in conjunction with the review of an application for label approval. The proposed regulations also provide that TTB may request such information after the issuance of a COLA, or in connection with any product that is required to be covered by a COLA. The proposed regulations also provide that, upon request of the appropriate TTB officer, a bottler or importer must submit a full and accurate statement of the contents of any container to which labels are to be or have been affixed, as well as any other documentation on any issue pertaining to whether the wine, distilled spirits, or malt beverage is labeled in accordance with the TTB regulations. These amendments reflect current TTB policy.

As noted above, current TTB regulations and industry practice involve the submission of alcohol beverage formulas in varying forms and formats depending on the type of alcohol beverage and whether the product is domestically produced or imported. TTB believes that this multiplicity of procedures is unnecessarily complicated and burdensome for both the regulated industries and TTB. Accordingly, we propose in this document to amend the TTB regulations in parts 4, 5, and 7 to provide that a formula may be filed electronically by using Formulas Online, or it may be submitted on paper on TTB Form 5100.51. TTB anticipates proposing similar revisions to the IRC regulations in the near future. TTB notes that many industry members now use Formulas Online to submit formulas, and encourages all industry members to consider the advantages of online filing.

ii. Personalized labels.

The proposed regulations also set forth, for the first time, the process for applicants seeking label approval to receive permission from TTB to make certain changes in order to personalize labels without having to resubmit the labels for TTB approval (see §§ 4.29, 5.29, and 7.29). Personalized labels may contain a personal message, picture, or other artwork that is specific to the consumer who is purchasing the product. For example, a producer may offer custom labels to individuals or businesses that commemorate an event such as a wedding or grand opening.

Consistent with current policy, as set forth in TTB G 2011-5 and TTB G 2010-1, the proposed regulations provide that label applicants who intend to offer personalized labels must submit a template for the personalized label with their application for label approval, and note on the application a description of the specific personalized information that may change. If the application complies with the regulations, TTB will issue a COLA with a qualification that allows the personalization of labels. The qualification will allow the certificate holder to add or change items on the personalized label such as salutations, names, graphics, artwork, congratulatory dates and names, or event dates, without applying for a new COLA. All of these items on personalized labels must comply with the regulations.

The proposed rule provides that certain changes are not permitted on personalized labels. These include the addition of any information that discusses either the alcohol beverage or the characteristics of the alcohol beverage, as well as information that is inconsistent with or in violation of the provisions of the TTB regulations or any other applicable law or regulation.

3. Subpart C—Alteration of Labels, Relabeling, and Adding Information to Containers

As previously noted, the COLA requirements of the FAA Act are

intended to prevent the sale or shipment or other introduction in interstate or foreign commerce of distilled spirits, wine, or malt beverages that are not bottled, packaged, or labeled in compliance with the regulations. To ensure that products with proper labels are not altered once such products have been removed from bond, section 105(e) of the FAA Act (27 U.S.C. 205(e)) further provides:

It shall be unlawful for any person to alter, mutilate, destroy, obliterate, or remove any mark, brand, or label upon distilled spirits, wine, or malt beverages held for sale in interstate or foreign commerce or after shipment therein, except as authorized by Federal law or except pursuant to regulations of the Secretary of the Treasury authorizing relabeling for purposes of compliance with the requirements of this subsection or of State law.

Regulations that implement these provisions of the FAA Act, as they relate to wine, distilled spirits, and malt beverages, are set forth in parts 4, 5, and 7, respectively. Current §§ 4.30 and 7.20 provide that someone wanting to relabel must receive prior written permission from the appropriate TTB officer. Current § 5.31 does not require prior written approval for the relabeling of distilled spirits, as long as such relabeling is done in accordance with an approved COLA.

In proposed subpart C of parts 4, 5, and 7, TTB proposes conforming changes to the regulations that implement this statutory prohibition. This subpart also sets forth the situations in which a person must apply for and obtain written approval prior to relabeling.

Proposed §§ 4.41(a), 5.41(a), and 7.41(a) set forth the statutory prohibition under 27 U.S.C. 205(e) on the alteration of labels. The proposed language provides that the prohibition applies to any persons, including retailers, holding wine for sale in (or after shipment in) interstate or foreign commerce.

Proposed §§ 4.41(b), 5.41(b), and 7.41(b) provide that for purposes of the relabeling activities authorized by this subpart, the term “relabel” includes the alteration, mutilation, destruction, obliteration, or removal of any existing mark, brand, or label on the container, as well as the addition of a new label (such as a sticker that adds information about the product or information engraved on the container) to the container, and the replacement of a label with a new label bearing identical information.

Proposed §§ 4.41(c), 5.41(c), and 7.41(c) contain new language that provides that authorization to relabel in no way authorizes the placement of labels on containers that do not accurately reflect the brand, bottler, identity, or other characteristics of the product; nor does it relieve the person conducting the relabeling operations from any obligation to comply with the regulations in this part and with State or local law, or to obtain permission from the owner of the brand where otherwise required.

The existing regulations in parts 4 and 7 require persons wishing to relabel to obtain written permission from TTB, with certain exceptions, while the regulations in part 5 require persons wishing to relabel to obtain a COLA from TTB. TTB believes that the regulations in parts 4, 5 and 7 should be updated to cover all of the situations in which people need to relabel. The existing regulations in part 5 allow persons who are eligible to obtain COLAs covering the products, such as bottlers and importers, to relabel the products even after they have been removed from bottling premises or customs custody, respectively. The proposed rule extends this provision to parts 4 and 7. However, the language in existing parts 4 and 7 allows persons who are not eligible to obtain COLAs, such as retailers, to obtain written permission from TTB to relabel products that are in the marketplace when unusual circumstances exist. The proposed rule extends this provision to part 5.

Accordingly, proposed §§ 4.42(a), 5.42(a), and 7.42(a) provide that proprietors of bonded wine premises, distilled spirits plant premises, and breweries, respectively, may relabel domestically bottled products prior to their removal from, and after their return to bond at, the bottling premises, with labels covered by a COLA, without obtaining separate permission from TTB for the relabeling activity. Proposed §§ 4.42(b), 5.42(b), and 7.42(b) provide that proprietors of bonded wine premises, distilled spirits plant premises, and breweries, respectively, may relabel domestically bottled products after removal from the bottling premises with labels covered by a COLA, without obtaining separate permission from TTB for the relabeling activity. This would, for example, allow a brewer to replace damaged labels on containers that are being held at a wholesaler's premises, as long as the labels are covered by a COLA, without obtaining separate permission from TTB to remove the existing labels and replace them with either identical or different approved labels.

Similarly, proposed §§ 4.42(c) and (d), 5.42(c) and (d), and 7.42(c) and (d) provide that, under the supervision of U.S. customs officers, imported wine, distilled spirits, and malt beverages, respectively, in containers in customs custody may be relabeled without obtaining separate permission from TTB for the relabeling activity. Such containers must bear labels covered by a COLA if and when they are removed from customs custody for consumption.

Proposed §§ 4.43, 5.43, and 7.43 cover relabeling activities that require separate written authorization from TTB. It is rare that someone other than the original bottler or importer will need to relabel the product, but these situations sometimes occur. For example, sometimes unlabeled wine containers are transferred between bonded wine premises. While the bottler is required to obtain a COLA to cover these containers prior to bottling, the transferee, who is labeling the containers, will sometimes want to put additional labels on the containers. In this case, the transferee must obtain TTB approval to place the new labels on the products and must be in possession of the necessary documentation to substantiate any new claims that will appear on the labels.

Thus, the proposed regulations provide that persons who are not eligible to obtain a COLA (such as retailers or permittees other than the bottler) may obtain written authorization for relabeling if the facts show that the relabeling is for the purpose of compliance with the requirements of this part or of State law. The written application must include copies of the original and proposed new labels; the circumstances of the request, including the reason for relabeling; the number of containers to be relabeled; the location where the relabeling will take place; and the name and address of the person who will be conducting the relabeling operations.

TTB is proposing to add to the malt beverage regulations a provision that is already found in slightly different forms in parts 4 and 5. This provision authorizes, without any requirement for separate written permission from TTB, the addition of a label identifying the wholesaler, retailer, or consumer as long as the label contains no reference to the characteristics of the product, does not violate the labeling regulations, and does not obscure any existing labels. The proposed regulations will standardize this provision for wine, distilled spirits, and malt beverages (see proposed §§ 4.44, 5.44, and 7.44).

TTB believes that the proposed regulations will enable permittees, brewers, and retailers to relabel alcohol beverage containers when there is a

good reason to do so, while still restricting the alteration of labels for containers that are in the marketplace. We seek comments from the industry on whether the proposed regulations will protect the integrity of labels in the marketplace without imposing undue burdens on the industry.

4. Subpart D—Label Standards

The current provisions governing legibility of labels, type size, and language requirements are found within one section of parts 4, 5, and 7 for wine, distilled spirits, and malt beverages, respectively. See current §§ 4.38, 5.33, and 7.28. Proposed subpart D includes those and other general provisions. These provisions are predominantly derived from and consistent with requirements set forth in the current regulations.

TTB is proposing to amend the sections that set forth legibility requirements for the mandatory information that is required to be placed on labels (proposed §§ 4.52, 5.52, and 7.52). These sections are derived from current §§ 4.38(a), 5.33(a) and (b), and 7.28(a).

The proposed regulations set forth the requirement that mandatory information must be “separate and apart” from descriptive or explanatory information, referred to in the proposed rule as “additional information,” with a few exceptions. First, brand names are exempt from this requirement. Second, this provision does not preclude the addition of brief optional phrases as part of the class and type designation (such as, “premium malt beverage”), the name and address statement (such as, “Proudly produced and bottled by ABC Winemaking Co. in Napa, CA, for over 30 years”), or other information required by the regulations, as long as the additional information does not detract from the prominence of the mandatory information. Finally, the mandatory statements related to disclosure of certain specified ingredients (FD&C Yellow No. 5, cochineal extract or carmine, sulfites, and aspartame) may not include additional information. It should be noted that the aspartame statement, like the health warning statement required by part 16, must be separate and apart from all other information.

The proposed regulations expand on the requirement that mandatory information must appear on a “contrasting background” by adding examples of contrasting backgrounds that would satisfy regulatory requirements. The color of the container and of the alcohol beverage in the container must be taken into account if the label is transparent. The text also clarifies that, with one exception (for the required aspartame statement), mandatory information may appear in lower case letters, capital letters, or both capital and lower-case letters.

The proposed rule makes changes to current provisions pertaining to minimum type size requirements. The current regulations setting forth minimum type size requirements (current §§ 4.38(b), 5.33(b)(5), 5.33(b)(6), and 7.28(b)) prescribe specific heights in millimeters for mandatory information. The height specification is dependent on the size of the container. Among other things, the proposed regulations provide that the minimum type size applies to all capital and lowercase letters.

The proposed rule also makes changes to current provisions pertaining to maximum type size requirements for the alcohol content statement for wine and malt beverages. Current § 4.38(b)(3) provides that the alcohol content statement on containers of 5 liters or less may not appear in script, type, or printing that is more than 3 millimeters in height. This section further provides that the alcohol content statement on containers of wine may not be set off with a border or otherwise accentuated. TTB is retaining the type size requirement, but removing the prohibition against accentuating the alcohol content statement. This is in keeping with TTB's current policy, which allows alcohol content statements to be bolded.

In general, current § 7.28(b)(3)(ii) provides that all portions of the alcohol content statement for malt beverages must be of the same size and kind of lettering and of equally conspicuous color, and not larger than 3 millimeters for containers of 40 fluid ounces or less, and not larger than 4 millimeters for containers larger than 40 fluid ounces. TTB is retaining the maximum alcohol content type size requirements for wine and malt beverages in §§ 4.53 and 7.53, respectively.

TTB is proposing to add sections to all three parts (proposed §§ 4.54, 5.54, and 7.54) to make it explicit that mandatory information may not be obscured in whole or in part. This requirement reflects current policy. Although it certainly is a long-standing component of “legibility,” TTB believes that industry members would benefit from the explicit statement of this policy in the regulatory text of parts 4, 5, and 7.

TTB seeks comments on whether the proposed changes to the placement and legibility requirements for mandatory information, which are intended to provide additional flexibility to industry members, adequately protect the consumer by ensuring that mandatory information on containers is readily apparent to consumers.

In proposed §§ 4.55, 5.55, and 7.55, TTB is proposing to amend the language requirements that are currently found in §§ 4.38(c), 5.33(c), and 7.28(c), to allow all mandatory information to appear in Spanish when products are bottled for sale in the Commonwealth of Puerto Rico. Consistent with the current regulations, the proposed regulations generally require mandatory information, other than the brand name, to appear in the English language. The proposed regulations also allow for additional statements in a foreign language, including translations of mandatory information that appears elsewhere in English on the label, to appear on labels and containers, as long as those statements do not conflict with, or contradict, the requirements of parts 4, 5, and 7. Finally, these sections provide that the country of origin may be in a language other than English when allowed by CBP regulations.

5. Subpart E—Mandatory Label Information

Proposed subpart E in parts 4, 5 and 7 sets forth the information that is required to appear on alcohol beverage labels (otherwise known as “mandatory information”). This subpart also prescribes where and how mandatory information must appear on such labels.

a. What constitutes a label.

TTB is proposing to add regulatory text to all three parts to specify what TTB will consider to be the “label” for purposes of mandatory information. Proposed §§ 4.61(a), 5.61(a), and 7.61(a) address different forms that labels take (for example, paper, plastic or film labels affixed to the container; information etched, engraved, sandblasted, or otherwise carved into the surface of the container; and information branded, stenciled, painted, printed, or otherwise directly applied to the surface of the container). For purposes of the net contents statement and the name and address statement only, the term “label” includes information blown, embossed, or molded into the container as part of the process of manufacturing the container.

Proposed §§ 4.61(b), 5.61(b), and 7.61(b) clarify that placement of information on certain parts of alcohol beverage containers (such as the bottom of the container, caps, corks, or other closures [unless authorized to bear mandatory information by the appropriate TTB officer], and foil or heat shrink capsules) will not meet the

requirements for mandatory information that must appear on labels. This provision is intended to take into account unique types of containers, such as pudding or gelatin-type cups, where the mandatory information is sometimes authorized to appear on the top of the container. Information on these parts of the container are still subject to the restrictions and prohibitions set forth in proposed subparts F, G and H of parts 4, 5, and 7.

Proposed §§ 4.61(c), 5.61(c), and 7.61(c) further clarify longstanding policy that any materials that accompany the container to the consumer but are not firmly affixed to the container, including booklets, leaflets, and hang tags, are not “labels” for purposes of proposed parts 4, 5, and 7. Such materials are instead subject to the advertising regulations in proposed new part 14 of the TTB regulations. This is a clarifying change for parts 4 and 5, consistent with the intent of T.D. ATF-180 (49 FR 31667, August 8, 1984), which explained in its preamble that “[l]abels must be firmly affixed to the container, hang tags are usually tied or slipped over the neck of the bottle. Therefore, when other matter accompanies the container and is not firmly affixed as a label, such matter is advertising material and must bear the mandatory statements.”

b. Packaging (including cartons, coverings, and cases).

Current regulations in §§ 4.38a and 5.41 set out rules for the placement of information on bottle cartons, booklets, and leaflets. Briefly, these regulations provide that individual coverings, cartons, or other containers of the bottle used for sale at retail (that is, other than a shipping container), as well as any written, printed, graphic, or other matter accompanying the bottle to the consumer shall not contain any statement, design, device or graphic, pictorial, or emblematic representation prohibited by the labeling regulations.

The current regulations also require the placement of mandatory label information on sealed opaque coverings, cartons, or other containers used for sale at retail (but not shipping containers). Coverings, cartons, or other containers of the bottle used for sale at retail that are designed so that the bottle is easily removable may display any information that is not in conflict with the label on the bottle contained therein. However, any brand names or designations must be displayed in their entirety, with any required modifications and/or statements of composition.

Thus, the prohibited practices for labeling set forth in existing §§ 4.39(a) and 5.42(a) apply to bottles, labels on bottles, any individual covering, carton, or other container of such bottles used for sale at retail, and any written, printed, graphic, or other matter accompanying such bottles to the consumer. Yet, the advertising regulations in existing §§ 4.61 and 5.62 define the term “advertisement,” in pertinent part, as including any written or verbal statement, illustration, or depiction, whether it appears in “a newspaper, magazine, trade booklet, menu, wine card, leaflet, circular, mailer, book insert, catalog, promotional material, sales pamphlet, or in any written, printed, graphic, or other matter accompanying the [container] bottle,” but excluding “[a]ny label affixed to any [container] bottle * * * or any individual covering, carton, or other [wrapper of such container] [container of the bottle] which constitutes a part of the labeling” under the labeling regulations.

The current labeling regulations in part 7 do not include regulations similar to current §§ 4.38a and 5.41. However, as set forth at current § 7.29(a) and (h), the prohibited practices in the labeling regulations for malt beverages apply to containers, any labels on such containers, or any cartons, cases, or individual coverings of such containers used for sale at retail, as well as to any written, printed, graphic, or other material accompanying malt beverage containers to the consumer. The current advertising regulations in part 7, like the advertising regulations in parts 4 and 5, define the term “advertisement” (in current § 7.51) to include, in pertinent part, any written or verbal statement, illustration, or depiction, whether it appears in “a newspaper, magazine, trade booklet, menu, wine card, leaflet, circular, mailer, book insert, catalog, promotional material, sales pamphlet, or in any written, printed, graphic or other matter accompanying the container, representations made on cases * * * or in any other media;” but excluding any “label affixed to any container of malt beverages; or any coverings, cartons, or cases of containers of malt beverages used for sale at retail which constitute a part of the labeling” under the labeling regulations.

TTB believes that the existing regulations create some confusion as to when a case or hang tag constitutes labeling and when it constitutes advertising. Accordingly, TTB is proposing identical regulations in proposed §§ 4.62, 5.62, and 7.62 to address packaging. The proposed regulations provide, consistent with existing regulations in parts 4, 5 and 7, that packaging may not include any statements or representations prohibited by the labeling regulations from appearing on containers or labels. The proposed regulations also provide, consistent with existing regulations in parts 4 and 5 but as a new requirement for part 7, that closed packaging, including sealed opaque coverings, cartons, cases, carriers, or other packaging used for sale at retail, must include all mandatory information required to appear on the label.

Furthermore, the proposed regulations provide greater clarity than the current provisions about when packaging is considered closed. Proposed §§ 4.62, 5.62, and 7.62 provide that packaging is considered closed if the consumer must open, rip, untie, unzip, or otherwise manipulate the package to remove the container in order to view any of the mandatory information. Packaging is not considered closed if a consumer could view all of the mandatory information on the container by merely lifting the container up, or if the packaging is transparent or designed in a way that all of the mandatory information can easily be read by the consumer without having to open, rip, untie, unzip, or otherwise manipulate the package. TTB seeks comment on whether TTB should require mandatory or dispelling information to appear on open packaging when part of the label is obscured.

TTB solicits comments on whether the proposed rules will require significant change to labels, containers, or packaging materials. We also solicit comments on whether the proposed revisions will provide better information to the consumer and make it easier to find mandatory information on labels, containers, and packages.

c. Placement rules.

Mandatory information includes the brand name, the class and type designation, alcohol content, net contents, name and address of the responsible party (such as the producer, bottler, or importer), and disclosure of certain ingredients and processes. The current regulations have placement requirements for mandatory information--some mandatory information must appear on the “brand label,” and other mandatory information may appear on any label. The regulations in parts 4 and 7 define the brand label as the label carrying, in the usual distinctive design, the brand name. The regulations in part 5 define the brand label, in part, as the principal display panel that is most likely to be displayed, presented, shown, or examined under normal and customary conditions of display for retail sale, and any other label appearing on the same

side of the bottle as the principal display panel.

TTB proposes to provide more flexibility in the placement of the mandatory information for wine, distilled spirits, and malt beverages by eliminating the concept of a defined “brand label.” The specific proposals for locating mandatory information on labels for each commodity will be included in the commodity-specific discussions later in the preamble. Where placement requirements exist, the proposed rule provides more specific terminology. Instead of requiring mandatory information to be in “direct conjunction” with other mandatory information, the proposed regulations clarify when such information must be immediately adjacent to other information, and when it may be in the same field of vision as other information.

d. Brand name.

Proposed §§ 4.64, 5.64, and 7.64 set forth requirements for brand names of wine, distilled spirits, and malt beverages, respectively. Most of the provisions in these sections are commodity specific and are therefore discussed individually later in this document.

However, one proposed change is made in all three parts: TTB is proposing to remove a provision for the continued use of certain trade names of foreign origin that had been used for at least five years immediately preceding August 29, 1935 (the date the FAA Act was enacted). Although the law still authorizes the use of these names, TTB believes that there is no need to retain this provision in the regulations, given that it refers to names that have been used for more than 85 years.

e. Name and address for domestically bottled products.

In the regulations on the name and address of bottlers and producers of wine, distilled spirits, and malt beverages, TTB is making editorial changes to existing requirements.

As previously mentioned, the FAA Act provides that wine, distilled spirits, and malt beverage labels must contain certain mandatory information, including the name of the manufacturer, bottler, or importer of the product. See 27 U.S.C. 205(e)(2). The regulations for distilled spirits and malt beverage labels currently provide more flexibility than the regulations for wine labels. Most importantly, wine labels must show the name of the bottler and the place where bottled, while bottlers of distilled spirits and malt beverages have the flexibility to list either the place of bottling, every location at which the same industry member bottles the product, or, under certain circumstances, the principal place of business of the industry member that is bottling the product. Bottlers of distilled spirits or malt beverages that utilize one of the latter two options must mark the labels using a coding system that enables the bottler and TTB to trace the actual place of bottling of each container. This both protects the revenue and allows for the tracing of containers in the event of an adulteration issue.

TTB is aware that, with the growing number of craft brewers and craft distillers in the marketplace, there may be more interest among consumers as to where malt beverages are brewed and where distilled spirits are distilled. On the other hand, TTB also wishes to provide industry members with flexibility in their labeling statements, to accommodate the growing number of arrangements where products are produced or bottled pursuant to contractual arrangements. One of the major reasons for allowing the use of principal places of business and multiple addresses on labels is to allow industry members to use a single label for their products rather than having to seek approval of multiple labels. TTB notes that, under both the existing and proposed regulations, industry members are always free to include optional statements that provide consumers with more information about their production and bottling processes if they wish.

TTB seeks comments from all interested parties, including industry members and consumers, on whether the proposed labeling requirements provide adequate information to the consumer while avoiding undue burdens on industry members. TTB also seeks comments on whether the standards for wine labels should continue to require specific information about the place where production and/or bottling operations occurred.

f. Name and address for imported alcohol beverages.

The name and address inform the consumer of the identity of the importer of the alcohol beverage product and the location of the importer's principal place of business. The current regulations at § 4.35(b), 5.36(b), and 7.25(b) provide that, on labels of imported wines, distilled spirits and malt beverages, respectively, the words “imported by,” or a similar appropriate phrase, must be stated, followed immediately by the name of the permittee who is the importer, or exclusive agent, or sole distributor, or other person responsible for the importation, together with the principal place of business in the United States of such person.

Like the current regulations, the proposed regulations in §§ 4.68, 5.68, and 7.68 require the name and address of the importer when the product is imported in containers. The proposed regulations clarify that for purposes of these sections, the importer is the holder of an importer's basic permit making the original Customs entry into the United States, or is the person for whom such entry is made, or the holder of an importer's basic permit who is the agent, distributor, or franchise holder for the particular brand of imported alcohol beverages and who places the order abroad. These provisions mirror the policy set forth in Revenue Ruling 71-535 with regard to the name and address requirements applicable to importers, and the ruling will be superseded by the proposed rule.

Proposed §§ 4.67, 5.67, and 7.67 address the labeling of products bottled after importation. If the product is bottled after importation in bulk, by or for the importer thereof, the proposed rules require an “imported and bottled by” or “imported by and bottled for” statement, as appropriate.

The proposed regulations in §§ 4.67, 5.67, and 7.67 specifically address the name and address requirements applicable to wine, distilled spirits, and malt beverages that are imported in bulk and then subject to further production or blending activities in the United States.

In section 1421 of the Taxpayer Relief Act of 1997, Public Law 105-34, Congress enacted a new provision in the IRC which permits the transfer of beer in bulk containers from customs custody to internal revenue bond at a brewery. After transfer to internal revenue bond at a brewery, imported beer may be bottled or packed without change or with only the addition of water and carbon dioxide, or may be blended with domestic or other imported beer and bottled or packed.

In ATF Procedure 98-1, TTB's predecessor agency provided guidance to brewers and bottlers for the labeling of imported malt beverages bottled in the United States. This guidance was necessary because the existing regulations in part 7 do not address the labeling of imported malt beverages that are bottled in the United States, or the labeling of imported malt beverages that are blended with other imported malt beverages or with domestic malt beverages, and then bottled or packed in the United States.

Section 1422 of The Taxpayer Relief Act of 1997 amended 26 U.S.C 5364 to allow the importation of wine in bulk to bonded wine premises; the law was amended the following year by Public Law 105-206 to restrict this privilege to natural wine. However, even prior to

this amendment, imported taxpaid wine could be brought onto taxpaid wine premises and bottled in the United States. Thus, the regulations in part 4 already provide for the labeling of wine bottled after importation. However, the current regulations do not reflect the fact that wine may be subjected to production activities in the United States after importation in bulk. ATF Procedure 98-3 provided some guidance on this issue.

Similarly, the current regulations in part 5 provide for the labeling of distilled spirits bottled after importation, but do not provide rules concerning the labeling of spirits that were subject to production activities in the United States after importation.

Thus, proposed §§ 4.67, 5.67, and 7.67 provide rules for the labeling of wine, distilled spirits, and malt beverages that are imported in bulk and are then blended with wine, distilled spirits, or malt beverages, respectively, of a different country of origin, or subjected to production activities in the United States that would alter the class or type of the product. The proposed rules provide that such products must be labeled with a “bottled by” statement, rather than an “imported by” statement. ATF Procedure 98-1 would be superseded by the proposed rule, because its provisions on the labeling of malt beverages imported in bulk will be incorporated, with modifications, into the name and address regulations found in proposed § 7.67.

As further discussed in the next section of this preamble, industry members should note that pursuant to CBP regulations at 19 CFR parts 102 and 134, imported alcohol beverages that are further processed in the United States, or that are blended with domestic alcohol beverages in the United States, may be subject to a country of origin marking requirement, even when the class or type of the product has been altered in the United States. See ATF Ruling 2001-2.

g. Country of origin.

Current regulations require a country of origin statement on labels of imported distilled spirits, but include no such requirement for imported wine or malt beverages. Nonetheless, U.S. Customs and Border Protection (CBP) regulations require a country of origin statement to appear on containers of all imported alcohol beverages, including alcohol beverages that are imported in bulk and then subjected to certain production activities or bottling in the United States if, pursuant to CBP regulations, the beverage is the product of a country other than the United States.

The existing distilled spirits regulations in § 5.36(e) provide as follows: “On labels of imported distilled spirits there shall be stated the country of origin in substantially the following form “Product of __”, the blank to be filled in with the name of the country of origin.” TTB's predecessor agency, ATF, was asked to clarify this requirement as applied to products that consist of blends of spirits produced in more than one country, including mixtures of foreign and domestic spirits. ATF determined that when the country of origin regulation in Part 5 was originally written, the agency did not contemplate that bottlers would blend imported and domestic spirits. When written, the regulations assumed that imported spirits would be bottled using 100 percent imported spirits. Accordingly, ATF issued ATF Ruling 2001-2 to provide that country of origin statements under the regulations in part 5 must comply with applicable CBP requirements.

In ATF Ruling 2001-2, ATF concluded that its country of origin requirements under § 5.36(e) will be interpreted in a manner consistent with CBP's rules of origin, noting that issuance of separate ATF regulations might lead to inconsistencies between CBP and ATF rules and result in confusion for the industries affected by those rules. Accordingly, the ruling held that for an imported distilled spirit that is wholly the product of a single country, the country of origin will be stated in substantially the following form, “Product of __.” It further held that “substantially the following form” meant that the distilled spirit may, in the alternative, be labeled in conformity with CBP country of origin marking requirements. For a product composed of spirits produced in more than one country, including mixtures of foreign and domestic spirits, ATF held that the regulation would be satisfied if the country of origin was determined and marked in accordance with CBP regulations. The ruling also noted that an industry member could seek a ruling from Customs for a determination of the country of origin for its product.

TTB is proposing to amend § 5.69, and to add new §§ 4.69 and 7.69, to clarify the relationship between TTB and CBP regulations on this issue. As noted, ATF stated in ATF Ruling 2001-2 that issuance of separate ATF regulations on the country of origin issue might lead to inconsistencies between CBP and ATF rules and result in confusion for the industries affected by those rules. TTB shares the concerns expressed by its predecessor agency on this issue. Accordingly, the proposed §§ 4.69, 5.69 and 7.69 simply contain a cross-reference to the CBP regulations at 19 CFR parts 102 and 134 regarding country of origin statements, rather than independently requiring a country of origin statement under TTB regulations. The proposed regulations also provide that “[l]abeling statements with regard to the country of origin must be consistent with CBP regulations.” Finally, proposed §§ 4.69 and 7.69, as well as proposed § 5.69, provide that the determination of the country (or countries) of origin, for imported wines, malt beverages, and distilled spirits, respectively, as well as for blends of imported products with domestically produced beverages, must comply with CBP regulations.

While this is a new provision in the wine and malt beverage regulations, it will not impose any labeling changes, as it simply references an existing requirement found in CBP regulations. However, TTB believes that the proposed regulation will remind industry members who import alcohol beverages in bulk for processing or bottling in the United States that they must place a country of origin statement on the labels where required to do so by CBP regulations.

As discussed earlier in this preamble, industry members should note that pursuant to CBP regulations at 19 CFR parts 102 and 134, imported alcohol beverages that are further processed in the United States, or that are blended with domestic alcohol beverages in the United States, may nonetheless be subject to a country of origin marking requirement, even if the class or type of the product has been altered in the United States. See ATF Ruling 2001-2. When TTB issues COLAs for distilled spirits, wine, or malt beverage containers that do (or do not) include a country of origin statement, it is not making a factual or legal determination of whether such a statement is necessary, or whether a labeled country of origin would comply with either TTB or CBP rules. In fact, the application for label approval typically does not include the information that would be necessary to make such a determination. It is the responsibility of the industry member to ensure compliance with the country of origin marking requirement, both when alcohol beverages are imported in containers and when imported alcohol beverages are subject to bottling, blending, or production activities in the United States. Industry members may seek a ruling from CBP for a determination of the country of origin for their product.

6. Subparts F, G, and H—Statements That Are Restricted, Prohibited, or Prohibited if Misleading

The current regulations include a single section titled “Prohibited Practices” that sets forth a number of prohibited practices and also describes certain labeling practices that are regulated in various ways. In order to make regulatory provisions easier to find, and to improve readability, TTB proposes to divide the regulations addressing prohibited practices into three subparts: (1) Subpart F, practices that may be used under certain conditions, (2) subpart G, practices that are always prohibited, and (3) subpart H, practices that are prohibited only if they are used in a misleading manner on labels.

Proposed subparts F, G and H each contain language to clarify that the prohibitions in these subparts apply to any label, container, or packaging, and define those terms as used in these subparts. Specifically, for purposes of proposed subparts F, G, and H, the term “label” includes all labels on alcohol beverage containers on which mandatory information may appear, as set forth in proposed §§ 4.61, 5.61, and 7.61, as well as any other label on the container. These proposed sections also set out the parts of the container on which mandatory information may appear.

The proposed text defines “packaging” for purposes of proposed subparts F, G, and H, as any carton, case, carrier, individual covering or other packaging of such containers used for sale at retail, but does not include shipping cartons or cases that are not intended to accompany the container to the consumer. The proposed rule also provides that the term “statement or representation” as used in those subparts, includes any statement, design, device, or representation, and includes pictorial or graphic designs or representations as well as written ones. It also includes both explicit and implicit statements and representations. This provision avoids the need to repeat the reference to each type of statement or representation in every section in these subparts.

7. Subpart F—Restricted Labeling Statements

TTB is proposing a new section (see proposed §§ 4.85, 5.85, and 7.85) on the use of statements relating to environmental and sustainability practices, which reflects current TTB policy. The proposed rule allows statements related to environmental or sustainable agricultural practices, social justice principles, and other similar statements (such as, “Produced using 100% solar energy” or “Carbon Neutral”) to appear on labels as long as the statements are truthful, specific and not misleading. Statements or logos indicating environmental, sustainable agricultural, or social justice certification (such as, “Biodyvin,” “Salmon-Safe,” or “Fair Trade Certified”) may appear on labels of products that are actually certified by the appropriate organization.

8. Subpart G—Prohibited Labeling Practices

Subpart G sets forth the prohibited labeling practices. The proposed rule provides that the prohibitions set forth in this subpart apply to any label, container, or packaging, and then sets out the definitions of those terms for purposes of this subpart. The prohibited practices include false statements and obscene or indecent depictions. The proposed rule restates and reorganizes prohibitions currently found in the TTB regulations.

9. Subpart H—Labeling Practices That Are Prohibited if They Are Misleading

Proposed subpart H sets out the general prohibition against any statement or representation, irrespective of falsity, that is misleading to consumers as to the age, origin, identity, or other characteristics of the wine, distilled spirits, or malt beverages, or with regard to any other material factor. It also sets out different ways in which statements may be misleading. For example, an otherwise truthful statement may be misleading because of the omission of material information, the disclosure of which is necessary to prevent the statement from being misleading. This is not a new policy, but the proposed rule sets it out more clearly (see proposed §§ 4.122, 5.122, and 7.122).

TTB proposes to cancel Rev. Ruling 55-618, which deals with the use of the terms “kosher” and “altar” on wines. TTB believes that it should not restrict the approval of products labeled as “altar wine” to products to be sold only to religious organizations, as the ruling required, and proposes to eliminate that provision of the ruling. Additionally, the use of the terms “altar-type” or “altar-style” wine are not prohibited from appearing on alcohol beverage products because there is no reasonable basis for protecting the terms. However, the terms “kosher style” and “kosher type” will remain restricted to only kosher wines because the use of such terms on non-kosher wines would be misleading. TTB does not propose specific regulations implementing the restriction, but believes it is covered by the general prohibition on misleading statements.

a. Guarantees.

Proposed §§ 4.123, 5.123 and 7.123 prohibit the use of guarantees that are likely to mislead the consumer. Money-back guarantees are not prohibited. This is a restatement of existing policy currently found in §§ 4.39(a)(5), 5.42(a)(5), and 7.39(a)(5), with minor modifications for clarity.

b. Disparaging statements.

Proposed §§ 4.124, 5.124 and 7.124 specifically prohibit the use of false or misleading statements that explicitly or implicitly disparage a competitor's product. This proposed revision reflects the longstanding ATF and TTB policy (as expressed in T.D. ATF-180, 49 FR 31667, August 8, 1984) that a competitor's product is disparaged when statements or claims about the product, or relating to the product, are false or would tend to mislead the consumer. This policy does not preclude additional information such as “puffery” statements made about one's own product, nor does it prohibit truthful, nonmisleading comparative statements or claims that place the competitor's product in an unfavorable light.

In the proposed regulatory text, TTB also introduces examples of statements that would be prohibited under this provision. A statement of opinion such as “We think our [product] tastes better than any other [product] on the market” is not prohibited. However, a statement such as “We do not add arsenic to our [product]”, although truthful, would be considered to be disparaging because it falsely implies that other producers do add arsenic to their products. Furthermore, labels may not include statements that disparage their competitor's products by making specific allegations, such as “Brand X is not aged in oak barrels,” when such statements are untrue.

c. Tests or analyses.

Proposed §§ 4.125, 5.125 and 7.125 prohibit statements or representations of, or relating to, analyses, standards, or tests, whether or not truthful, that are likely to mislead the consumer. These proposed provisions incorporate current policy, but also provide new examples of such a misleading statement, designed to illustrate the principle that a truthful statement about a test or standard may nonetheless be misleading.

d. Depictions of government symbols.

Currently, representations relating to the American flag or the U.S. armed forces are prohibited from appearing on alcohol beverage labels in order to

prevent misconceptions that the alcohol beverage is endorsed or otherwise supervised by the U.S. government or the armed forces. However, the regulations prohibit the use of flags from other countries only where it would be misleading. The regulations on U.S. and foreign flags are based on the same statutory provision of the FAA Act at 27 U.S.C. 205(e)(5) that prohibits deception of the consumer by use of a name or representation of individuals or organizations when such use creates a misleading impression of endorsement.

Consistent with the statutory prohibition on which these regulations are based, it is TTB's current policy to enforce this regulatory prohibition only where such representations might tend to mislead consumers. Thus, TTB is proposing to amend the regulations to remove the blanket prohibition against the use of representations of, or relating to, the American flag, the armed forces of the United States, or other symbols associated with the American flag or armed forces. Instead, proposed §§ 4.126, 5.126, and 7.126 retain the prohibition against the use of such symbols or images where they create the impression that there was some sort of endorsement by, or affiliation with, the governmental entity represented. Furthermore, each of these proposed sections specifically provides that the section does not prohibit the use of a flag as part of a claim of American origin or another country of origin.

e. Depictions simulating government stamps or relating to supervision.

Proposed §§ 4.127, 5.127, and 7.127 retain prohibitions against depictions simulating government stamps or relating to government supervision but provide that these representations are only prohibited if misleading. TTB solicits comments on whether there is still a need for regulations on this issue.

f. Cross-category terms on labels of wine, distilled spirits, and malt beverages.

In proposed §§ 4.128, 5.128, and 7.128, TTB proposes to adopt a new prohibition on the misleading use of cross-commodity terms. Terms used to designate the class and type of wine, distilled spirits, and malt beverages are unique to each commodity. More and more frequently, TTB receives applications for approval of a label for one commodity where the label bears a term normally associated with a different commodity.

For malt beverage products, the current TTB regulations at § 7.29(a)(7) prohibit a label from containing any statement, design, device, or representation that tends to create a false or misleading impression that the malt beverage contains distilled spirits or is a distilled spirits product. (See also 27 CFR 4.39(a)(7), which prohibits misleading statements on wine that create the impression that the wine contains distilled spirits. This prohibition does not apply to truthful statements of composition.) While the current regulations do not prohibit the use of wine terms on malt beverage labels or the use of wine or malt beverage terms on distilled spirits labels, TTB believes that the use of terms normally associated with one commodity may be misleading if used on a product of a different commodity.

For example, if a term that is a class or type designation for wine is used on a malt beverage label as the brand name or as a distinctive or fanciful name, or is placed on the label in an otherwise prominent position, the label may create the misleading impression that the malt beverage is produced with the addition of wine. As a result, TTB has denied approval of labels bearing such terms when it has determined that the labels were misleading. This denial is authorized under TTB's general authority to prohibit misleading information on labels, which is codified at current §§ 4.39(a), 5.42(a), and 7.29(a). However, in other cases, TTB has determined that references to other commodities on labels do not mislead consumers as to the identity of the product. The determination of whether the reference is misleading depends on the overall label, and how the information is presented.

TTB believes that, in order to deal with this issue consistently, the regulations should set forth specific rules about the use of defined terms for one commodity on labels of another commodity. Accordingly, TTB is proposing to amend the regulations to specifically provide that no label, container, or packaging may contain a statement, design, or device that tends to create the false or misleading impression that the product is, or contains, a different commodity. Furthermore, the proposed regulations prohibit class or type designations (or any homophones or coined words that simulate or imitate a class or type designation) that are set forth in the TTB regulations for one commodity from appearing on a label for a product of a different commodity, if such representation creates a misleading impression about the identity of the product.

Consistent with past practice, the proposed regulation does not prohibit a truthful and accurate statement of alcohol content. Similarly, it does not prohibit the use of a brand name of a different commodity, provided that the overall label or advertisement does not create a misleading impression about the identity of the product. The proposed rule continues to allow the use of cocktail names as brand names or distinctive or fanciful names, provided that the overall label or advertisement does not create a misleading impression about the identity of the product.

The proposed rule does not prohibit the use of truthful and accurate statements about the production of the product, as part of a statement of composition or otherwise, such as “aged in whisky barrels” for a malt beverage or wine, so long as such statements do not create a misleading impression as to the identity of the product. Consistent with TTB Ruling 2014-4, while statements about aging malt beverages in barrels previously used in the production or storage of distilled spirits or wine are not prohibited, statements that imply that the product contains distilled spirits (such as “bourbon flavored beer”) are prohibited as misleading.

Finally, TTB proposes to continue to allow the use of terms that compare a product or products of one commodity to a product or products of a different commodity (such as, “This wine doesn't have the hoppy taste of beer”) without creating a misleading impression as to the identity of the product.

TTB solicits comments on whether the proposed prohibition and the proposed exceptions to the prohibition will adequately protect the consumer and whether the proposed regulations will require changes to existing labels. TTB particularly solicits comments on whether the use of coined terms and homophones in brand names and elsewhere on the labels is misleading to consumers when those terms imply similarity to class and type designations to which a product is not entitled.

g. Appearance of endorsement.

The current regulations prohibit the use of the name of a living person or existing private or public organization if the use of that name or a representation misleads the consumer to believe that the product has been endorsed, made, or used by, or produced for, or under the supervision of, or in accordance with the specifications of, such individual or organization. TTB proposes, in §§ 4.130, 5.130, and 7.130, to maintain that rule, but to make more clear that actual endorsements are permitted and that TTB may request documentation supporting the claim of endorsement at the time the application for label approval is submitted or at a later time.

10. Subpart I—Classifications

Subpart I in parts 4, 5, and 7 sets forth rules for the classification of wine, distilled spirits, and malt beverages, respectively. As noted earlier in this document, wine, distilled spirits, and malt beverages are organized into general classes and, within the classes, more specific types. These classes and types, in the case of wine and distilled spirits, have specific standards listed in the regulations; these are known as “standards of identity.” For malt beverages, the class and type designations are based on designations of products as known to the trade. The specific classification rules and the changes TTB proposes to make to these rules will be discussed below in the part-specific sections of this document.

11. Subpart K for Parts 4 and 5, Standards of Fill

In subpart K of parts 4 and 5, TTB maintains the current requirements for specified standards of fill (see §§ 4.202 and 5.202). (TTB plans to propose changes to the standards of fill in a separate rulemaking document.) Additionally, TTB proposes to codify its existing policies regarding aggregate packaging.

a. TTB's Current Regulations on Standards of Fill.

TTB administers regulations setting forth container size and related standards of fill for containers of distilled spirits and wine distributed within the United States. (There are no standard of fill requirements for malt beverages.) The standards of fill appear in the current regulations in § 4.72 for wine, and §§ 5.47 and 5.47a for distilled spirits. Containers conforming to a standard of fill of, for example, 750 mL—which is a standard of fill prescribed by current regulations for both wine and distilled spirits—must have a net contents of 750 mL of that product.

b. Aggregate Packaging to Meet a Standard of Fill.

In 1988, TTB's predecessor agency started permitting bottlers and importers of wine and distilled spirits products to use containers that did not meet a standard of fill provided that the non-standard of fill containers were banded or wrapped together and sold as a single wine or distilled spirits product that, in total, met an approved standard of fill. For example, a wine or distilled spirits product sold in a package of thirty 25 mL containers to meet an authorized standard of fill of 750 mL would be an aggregate package under this policy. While this type of aggregate packaging has been permitted for some time, TTB's policy has not yet been codified in the regulations.

In Notice No. 872, published in the

Federal Register

(64 FR 6485) on February 9, 1999, ATF proposed to codify standards on this issue. According to the preamble of this NPRM, the issue of whether standard of fill requirements may be satisfied by aggregate packaging was first raised in 1988, when an importer sought permission to import bags containing 25 individual 15-mL packages of alcohol beverage for a total of 375 mL, an authorized standard of fill. The request was approved, as were subsequent requests for other types of containers, such as distilled spirits products packaged in packs of thirty 25-mL test tubes to meet an authorized standard of fill of 750 mL.

In the NPRM, ATF stated that it was concerned that the wide array of container types and packaging coming onto the market—including, but not limited to, aggregate packaging—would have a number of adverse impacts including: (1) Confusing consumers as to the quantity and nature of the alcohol beverage; (2) contributing to administrative difficulty in determining appropriate excise tax for the products; (3) making aggregate fill products more easily obtainable by underage individuals; and (4) creating problems with State and local alcohol beverage controls, either by conflicting with State standard of fill provisions or with prohibitions against open containers of alcohol beverages. Accordingly, the NPRM proposed regulations prohibiting the use of aggregate packaging to meet standard of fill requirements.

ATF received approximately 100 comments on the NPRM, with 40 percent of the comments against the proposed regulations and 60 percent favoring them. Comments against the proposed regulations came from the alcohol beverage industry and related industries, such as packaging manufacturers; although one alcohol beverage producer supported the proposed regulations. Comments from industry regarding aggregate packaging mainly contended that the issue could be addressed with labeling requirements and that limiting package sizes was an unnecessary overreach by ATF. Comments on the aggregate packaging aspect of the proposed regulations came mostly from companies that were already using aggregate packaging to meet standard of fill requirements. However, most of the comments against the proposed regulations were not addressed to aggregate packaging, but to another aspect of the NPRM, which proposed regulations relating to packaging that appeared similar to packaging for non-alcohol products. The comments in favor of the proposed regulations came from consumers, parents, substance abuse agencies and consumer advocacy organizations, and were mostly general statements of support for the proposed regulations that did not specify which aspect of the NPRM (aggregate packaging or packaging types) they supported.

The regulations proposed in Notice No. 872 to prohibit aggregate packaging to meet the authorized standards of fill were not finalized, and the practice of aggregate packaging continues today. ATF encouraged the industry to adopt a number of safeguards to protect against consumer deception in the event that aggregate packages were broken apart and the single-serving packages sold individually. These safeguards included labeling the individual containers as “not for individual sale” and “not for children,” sealing the outer container with shrink wrap or other secure methods, and encouraging bottlers to bottle the individual units of the package in authorized standards of fill (for example, in 50-mL units). TTB continues to allow aggregate packaging under the following conditions:

• The applicant submits to TTB, along with the application for label approval, a sample of the actual external container and a sample of one of the smaller internal containers.

• The external container, as well as each of the smaller internal containers, is labeled with all of the mandatory information required by parts 4 and 24 for wine and parts 5 and 19 for distilled spirits, as well as the health warning statement required by part 16.

• The external container is shrink-wrapped, boxed, or sealed in such a manner that the smaller internal containers cannot be easily removed.

• Each of the smaller internal containers is labeled “NOT FOR INDIVIDUAL SALE.”

• The external container bears a statement of total net contents that clearly shows how the contents of the individual packages added together are equivalent to one of the authorized standards of fill. (For example, 750 mL = 30 containers of 25 mL each.)

In recent years, TTB's policy regarding aggregate packaging has shifted to allow for non-standard of fill containers to be packaged together even when those containers do not hold the same product. For example, products of differing standards of identity and differing alcohol contents have been permitted to be packaged together as one product. TTB has reevaluated this shift in policy and has determined that

it is inconsistent with the original intent of the aggregate packaging policy, which was to allow one product to be bottled in non-standard of fill containers that would be banded together so that the sum of the identical parts would equal a standard of fill for that product.

c. Proposed Regulatory Amendment.

The regulations proposed in this rulemaking document provide for aggregate packaging subject to the conditions set forth above and with the additional requirements that the wine or distilled spirits packaged in the individual non-standard of fill containers within an aggregate package must all be of the same class and type, alcohol content, and tax class. This is a narrowing of the current policy that allows for wines and distilled spirits of differing classes, types, and alcohol contents to be packaged together. TTB believes that this narrowing of the policy is necessary to maintain the original intent of standards of fill requirements, reduce consumer confusion when comparing products, and reduce administrative burden when calculating the tax liability of an aggregately packaged wine or distilled spirits product. The proposed provisions related to aggregate packaging appear in §§ 4.204 and 5.204.

If each internal container already complies with an authorized standard of fill, then the aggregate standard of fill conditions would not apply, and the internal containers would each be subject to label approval. The outer packaging would then be subject to the packaging regulations proposed at §§ 4.62 and 5.62. TTB believes it is appropriate to codify the rules related to aggregate packaging, which apply to labeling and standards of fill, as part of this modernization project.

12. Subpart L—Recordkeeping and Substantiation Requirements

Subpart L of parts 4, 5, and 7 sets forth rules for recordkeeping and substantiation requirements for alcohol beverages. Existing regulations (27 CFR 4.51, 5.55, and 7.42) require bottlers holding an original or duplicate original of a certificate of label approval (COLA) or a certificate of exemption to exhibit such certificates, upon demand, to a duly authorized representative of the United States Government. Current regulations (27 CFR 4.40, 5.51, and 7.31) also require importers to provide a copy of the applicable COLA upon the request of the appropriate TTB officer or a customs officer. However, these regulations do not state how long industry members should retain their COLA. Furthermore, since these regulations were originally drafted, TTB has implemented the electronic filing of applications for label approval. Now, over 90 percent of new applications for label approval are submitted electronically, and the rest are processed electronically by TTB. Industry members have asked for clarification as to whether they have to retain paper copies of certificates that were processed electronically. Finally, because industry members may make certain specified revisions to approved labels without obtaining a new COLA, it is important that the industry members keep track of which label approval they are using when they make such revisions.

Accordingly, proposed §§ 4.211, 5.211, and 7.211 are new to the regulations and provide that, upon request by the appropriate TTB officer, bottlers and importers must provide evidence of label approval for a label that is used on an alcohol beverage container and that is subject to the COLA requirements of the applicable part.

This requirement may be satisfied by providing original certificates, photocopies or electronic copies of COLAs, or records showing the TTB identification number assigned to the approved COLA. Where labels on containers reflect revisions to the approved label that have been made in compliance with allowable revisions authorized to be made on the COLA form or otherwise authorized by TTB, the bottler or importer must be able to identify the COLA covering the product, upon request by the appropriate TTB officer. Bottlers and importers must be able to provide this information for a period of five years from the date the products covered by the COLAs were removed from the bottler's premises or from customs custody, as applicable.

TTB believes that five years is a reasonable period of time for record retention because there is a five-year statute of limitations for criminal violations of the FAA Act. TTB notes that the proposed rule does not require industry members to retain paper copies of each certificate; they should simply be able to track a particular removal to a particular certificate, and they may rely on electronic copies of certificates, including copies contained in the TTB Public COLA Registry.

While the FAA Act does not contain any specific recordkeeping requirements in this regard, the labeling regulations have for decades required industry members to produce COLAs upon demand. Furthermore, such records are necessary to enforce the requirements of the FAA Act with regard to COLAs and certificates of exemption. See,

e.g., National Confectioners Ass'n

Califano,

569 F.2d 690, 693-94 (D.C. Cir. 1978), which upheld the FDA's authority to require records in the absence of a specific statutory requirement where records were necessary to help in the efficient enforcement of the Federal Food, Drug and Cosmetic Act.

Similarly, the FAA Act provides TTB with comprehensive authority over the labeling of wine, distilled spirits, and malt beverages, and the COLA provisions of the FAA Act are specifically designed to “prevent the sale or shipment or other introduction of distilled spirits, wine, or malt beverages in interstate or foreign commerce, if bottled, packaged, or labeled in violation of [27 U.S.C. 205(e)].” See 27 U.S.C. 205(e). The law specifically requires a certificate holder to have the COLA in its possession at the time of bottling or removal of containers from customs custody. Requiring the holder to be able to show evidence of label approval after removal is simply a clarification of TTB's current requirements. We note that in addition to the rulemaking authority provided by 27 U.S.C. 205, TTB has authority under section 2(d) of the FAA Act, Public Law 74-401 (1935) “to prescribe such rules and regulations as may be necessary to carry out [its] powers and duties” under the FAA Act.

Proposed §§ 4.212, 5.212, and 7.212 set forth specific substantiation requirements, which are new to the regulations, but which reflect TTB's current expectations as to the level of evidence that industry members should have to support labeling claims. The proposed regulations provide that all claims, whether implicit or explicit, must have a reasonable basis in fact. Claims that contain express or implied statements regarding the amount of support for the claim (

e.g.,

“tests provide,” or “studies show”) must have the level of substantiation that is claimed.

Furthermore, the proposed regulations provide for the first time that any labeling claim that does not have a reasonable basis in fact, or cannot be adequately substantiated upon the request of the appropriate TTB officer, will be considered misleading. The regulations in subpart H are similarly amended to include the same requirement. TTB believes that this provision, which is very similar to the Federal Trade Commission's policy on substantiation of advertising claims, will clarify that industry members are responsible for ensuring that all labeling and advertising claims have adequate substantiation. See “FTC Policy

Statement Regarding Advertising Substantiation” (Appended to

Thompson Medical Co.,

104 F.T.C. 648, 839 (1984),

aff'd,

791 F.2d 189 (D.C. Cir. 1986),

cert. denied,

479 U.S. 1086 (1987)).

13. Subpart M--Penalties and Compromise of Liability

In proposed subpart M for parts 4, 5, and 7, TTB proposes simply to include references to various provisions of the FAA Act. Proposed §§ 4.221, 5.221 and 7.221 state that a violation of the labeling provisions of 27 U.S.C. 205(e) is punishable as a misdemeanor and refer readers to 27 U.S.C. 207 for the statutory provisions relating to criminal penalties, consent decrees, and injunctions. Proposed §§ 4.222, 5.222, and 7.222 provide that basic permits are conditioned upon compliance with the provisions of 27 U.S.C. 205, including the labeling provisions of parts 4, 5 and 7, and that a willful violation of the conditions of a basic permit provides grounds for the revocation or suspension of the permit, as applicable, as set forth in 27 CFR part 1.

Proposed §§ 4.223, 5.223, and 7.223 set forth TTB's authority to compromise liability for a violation of 27 U.S.C. 205 upon payment of a sum not in excess of $500 for each offense. This payment is to be collected by the appropriate TTB officer and deposited into the Treasury as miscellaneous receipts.

By placing these provisions in the regulations, TTB will make it easier for a person to locate the penalties for violating the FAA Act and the regulations implementing the FAA Act. These proposed regulations will not change the criminal penalty and compromise provisions, which are set forth in the statute.

14. Subpart N—Paperwork Reduction Act

The Office of Management and Budget (OMB) assigns control numbers to TTB's information collection requirements. In current parts 4, 5, and 7, the OMB control numbers, in some instances, are listed at the end of the sections that impose the respective information collection requirements. TTB believes that industry members will have an easier time locating OMB control numbers for information collection requirements if they are listed in one location. Therefore, proposed subpart N for parts 4, 5, and 7 contains a listing of those sections of proposed part 4, 5, or 7, as the case may be, that impose an information collection requirement along with the assigned OMB control number.

C. Proposed Changes Specific to 27 CFR Part 4 (Wine)

In addition to the changes discussed in section II B of this document that apply to more than one commodity, TTB is proposing additional editorial and substantive changes specific to the wine labeling regulations in part 4. This section will not repeat the changes already discussed in section II B of this document. Accordingly, if a proposed change is not discussed in this section, please consult section II B. The substantive changes that are unique to part 4 are described below.

1. WWTG Labeling Protocol

As described below, TTB is proposing to make several liberalizing changes to the wine labeling regulations in part 4 to conform to international commitments. TTB believes that these changes will increase flexibility in labeling for bottlers and importers of wine, while providing consumers with more information about the wine that they are purchasing.

The World Wine Trade Group (WWTG), which was founded in 1998, is an informal grouping of government and industry representatives from Argentina, Australia, Canada, Chile, the Republic of Georgia, New Zealand, South Africa, and the United States. The group shares information and collaborates on a variety of international issues to create new opportunities for wine trade.

The WWTG Agreement on Requirements for Wine Labeling (“Agreement”) was initialed on September 20, 2006, and was signed in Canberra, Australia, on January 23, 2007, by the United States and other governments. This is an executive agreement and not a treaty. A full copy of the agreement can be viewed at

http://ita.doc.gov/td/ocg/WWTGlabel.pdf.

Negotiations of the Agreement proceeded from the view that common labeling requirements would facilitate trade by providing industry members with the opportunity to use the same label when shipping wine to each of the WWTG member countries.

To conform to Article 6 of the Agreement, which requires the parties to the Agreement to allow information regarding alcohol content and certain other common mandatory information to be placed anywhere on a label in a “single field of vision,” TTB engaged in rulemaking to eliminate the requirement in the TTB regulations that alcohol content be stated on the brand label. See T.D. TTB 114 (78 FR 34565, June 10, 2013). After the rulemaking was completed, the United States deposited its instrument of acceptance on October 1, 2013, and became a Party to the Agreement on November 1, 2013.

Under the Agreement, the Parties agreed to continue to discuss labeling requirements concerning tolerances in alcohol content statements, vintage wine, grape variety designations, and wine regions, with a view to concluding an additional agreement on labeling. This additional agreement--the Labeling Protocol--was signed on March 22, 2013, by several Governments other than the United States, and entered into force on November 1, 2013. A full copy of the Labeling Protocol can be found at

http://ita.doc.gov/td/ocg/protocol.pdf.

Because some of the existing labeling regulations in parts 4, 5 and 7 are inconsistent with the terms of the Labeling Protocol, TTB must engage in rulemaking on some of the issues addressed in the Protocol. We intend to address those issues in this proposed rule.

The Labeling Protocol reflects labeling requirements concerning tolerances in alcohol content statements, vintage wine, grape variety designations, and wine regions that are consistent with U.S. efforts to remove trade barriers. The Labeling Protocol will allow U.S. wine producers to export more easily to parties to the Agreement that have more restrictive labeling standards than the United States.

The proposed changes relating to the Labeling Protocol, as well as the other substantive changes that are unique to part 4 are described below, by subpart.

2. Subpart A—General Provisions

Proposed subpart A includes several sections that have general applicability to part 4, including a revised definitions section, a section that defines the territorial extent of the regulations, sections that set forth to whom and to which products the regulations in part 4 apply, a section that identifies other regulations that relate to part 4, and sections that address administrative items such as forms and delegations of the Administrator.

a. Definitions.

Proposed § 4.1, which covers definitions of terms used in part 4, is consistent with the current regulatory text that appears in § 4.10, with some amendments in addition to those discussed in section II B of this preamble.

TTB is proposing to add definitions of the following terms: “brix,” “county,” “fully finished,” and “grape wine.” These terms are used throughout part 4.

The proposed rule defines the term “brix” as “[t]he quantity of dissolved solids expressed as grams of sucrose in

100 grams of solution at 68 degrees Fahrenheit. (20 degrees Celsius) (Percent by weight of sugar).” This definition is derived from and is consistent with 27 CFR 24.10, with the exception of changing a typographical error currently found in section 24.10 of “60 degrees” to the correct temperature of “68 degrees.” TTB intends to correct the definition in § 24.10 in a separate rulemaking document.

The current and proposed regulatory texts use the term “county” when providing for authorized appellations of origin. TTB has been asked by many industry members if the term “county” includes other political subdivisions that are equivalent to a county, such as a “parish” in Louisiana. The proposed rule defines the term “county” to include a county or a political subdivision recognized by the State as a county equivalent. This proposed definition will allow the use of names of county equivalents as appellations of origin.

The current and proposed regulatory texts use the term “fully finished” when setting forth requirements for labeling wine with an appellation of origin. For example, one of the conditions in current § 4.25(b)(1)(ii) is that “the wine has been fully finished (except for cellar treatment pursuant to § 4.22(c), and blending that does not result in an alteration of class or type under § 4.22(b)) in one of the labeled appellation States.” The parenthetical statement after “fully finished” appears all three times that term is used in part 4. Accordingly, TTB is defining the term “fully finished” as “Ready to be bottled, except that it may be further subject to the practices authorized in § 4.154(c) and to blending that does not result in an alteration of class or type under § 4.154(b).”

The proposed regulatory text uses the term “grape wine” to include still grape wine, sparkling grape wine, and carbonated grape wine. The proposed definition reflects the name change of current class one grape wine to still grape wine, but allows for use of an umbrella term when referring to still grape wine, sparkling grape wine, and carbonated grape wine.

The proposed rule also amends the current definitions of the following terms: “bottler,” “pure condensed must,” “total solids,” and “wine.”

The current definition of the term “bottler” reads as “[a]ny person who places wine in containers of four liters or less.” TTB is proposing to remove the size restriction associated with the current definition to denote that a person filling containers of any size is considered a “bottler.” This change will allow industry members to use the term “bottled” rather than “packed” on labels of wine in containers larger than 4 liters. For example, the industry member may use “bottled by ABC winery, Sutton, Massachusetts” rather than “packed by ABC winery, Sutton, Massachusetts” as the mandatory address statement for a five-liter container. TTB is also proposing to replace the word “person” with the phrase “[a]ny producer or blender or wine, proprietor of bonded wine premises, or proprietor of a taxpaid wine bottling house” to better define those who are eligible to bottle wine. The proposed rule amends the term “bottler” to read as “[a]ny producer or blender of wine, proprietor of bonded wine premises or proprietor of a taxpaid wine bottling house, who places wine in containers.”

The proposed rule amends the definition of the term “pure condensed must” by removing the word “balling” and replacing it with the word “brix” because the word “brix” is more commonly used by the industry. The terms “balling” and “brix” are synonymous.

The proposed rule amends the definition of the term “total solids” by adding the words “with water” at the end of this definition to clarify that restoring wine to its original volume must be done with water.

The proposed rule amends the definition of “wine” under the FAA Act by making clarifying changes, consistent with the definition of “wine” in 27 CFR part 1. This is a technical change and does not alter the current meaning of “wine” in part 4.

b. Prohibitions and jurisdictional limits.

Proposed § 4.3 sets forth the general requirements and prohibitions under 27 U.S.C. 205(e). This repeats the essential elements of the prohibitions found in current § 4.30, and clarifies that the regulations that prohibit the alteration of labels apply to persons holding wine for sale.

c. Products that are not “wine” under the FAA Act.

Proposed §§ 4.5 and 4.6 are new provisions that indicate which wines are covered by part 4 and which wine products are not covered by part 4. TTB receives many inquiries on this issue, and TTB believes that including this information in the regulatory text will be helpful to its readers.

Certain winery products that may be taxed as wine under the IRC do not fall within the definition of “wine” under the FAA Act, as found in 27 U.S.C. 211(a)(6), because of the differences between the two statutes. Thus, proposed § 4.5 clarifies that wine under part 4 contains at least 7 percent and not more than 24 percent alcohol by volume. Proposed § 4.6(a) clarifies that part 4 does not cover products that would otherwise meet the definition of wine except that they contain less than 7 percent alcohol by volume. The proposed rule states that bottlers and importers of alcohol beverages that do not fall within the definition of malt beverages, wine, or distilled spirits under the FAA Act should refer to the applicable labeling regulations for foods issued by the FDA. Proposed § 4.6(b) clarifies that products that would otherwise meet the definition of wine except that they contain more than 24 percent alcohol by volume are classified as distilled spirits and must be labeled in accordance with 27 CFR part 5.

Proposed § 4.6 also includes a cross reference to § 4.7, which refers to labeling requirements under the ABLA and the IRC.

3. Subpart E—Mandatory Label Information

a. Brand labels.

Currently, the TTB regulations at § 4.32 require that certain information appear on the brand label of a wine container, while other mandatory information, and any additional information, may appear on any label. The brand label is defined in § 4.10 as “[t]he label carrying, in the usual distinctive design, the brand name of the wine” and, under current § 4.32, the brand name, class or type designation, and statement of the percentage of foreign wine in a blend of American and foreign wines (where a reference is made to the presence of foreign wine on the label), must appear on the brand label. Other mandatory information may appear on any label.

In practice, however, a brand label may wrap nearly or entirely around a bottle or other wine container. As a result, mandatory information may appear anywhere on certain bottles and containers. Furthermore, if the label bearing the brand name is on the back of the container, then it is the brand label.

TTB believes that the current regulations requiring that certain mandatory information be placed on the brand label of wine containers are unduly restrictive. TTB believes that consumers are used to looking at the back and neck labels to find mandatory information on containers.

Accordingly, TTB is proposing to amend the regulations in proposed § 4.63 to allow mandatory information to appear on any label on a wine container.

b. Brand names.

Proposed § 4.64 consolidates certain existing regulations with regard to brand names and puts

them in one section of the regulations. Current § 4.32 requires that a brand name be placed on labels of wine. What may be used as a brand name is specified in § 4.33. The current § 4.39(i) pertains to geographical brand names. The proposed rule moves these provisions to proposed § 4.64(c) without substantive changes.

TTB believes that placing the provisions pertaining to geographical brand names with the other provisions pertaining to brand names will enable industry members to find and understand the regulations pertaining to brand names more easily.

c. Alcohol content and the WWTG Labeling Protocol.

Under TTB's current regulations in § 4.36, the required alcohol content statement for wine may be expressed as a percentage of alcohol by volume, or as a range, subject to certain requirements. However, the percentage of alcohol by volume is not required to be specifically listed on the label if the type designation “table” or “light” wine appears on the label. Subject to certain restrictions, a tolerance of one percentage point is allowed for alcohol content statements of wines containing more than 14 percent alcohol by volume, and a tolerance of 1.5 percentage points is allowed for wines containing 14 percent or less alcohol by volume. One of the current exceptions to the tolerance provision states that the alcohol content statement on a wine label must correctly indicate both the taxable grade of the wine and the class and type of the wine if alcohol content is part of the definition of the class and type.

Pursuant to Article 4.1(b) of the WWTG Labeling Protocol, the United States has agreed to accept alcohol content tolerances of up to one percentage point, provided that the alcohol content statement must correctly indicate the tax category, regardless of tolerance levels. This is consistent with current regulations, except that it allows the use of a tolerance in cases that cross over minimum and maximum alcohol content levels for labeling designations, as long as this would not affect the tax category.

Accordingly, proposed § 4.65 maintains the current tolerance levels for alcohol content statements in wine, and maintains the current exception to the tolerance levels for alcohol content statements related to maximum and minimum alcohol contents for tax classifications under 26 U.S.C. 5041. The proposed rule allows the tolerance levels to apply to alcohol content statements that might affect the correct class and type designation, w unless the class or type designation reflects a minimum or maximum alcohol content requirement consistent with requirements set forth in a tax class.

An example of a class or type designation that reflects an alcohol content requirement consistent with a requirement set forth in a tax classification is “table wine.” The class and type designation “table wine” for a still grape wine is a designation that reflects a maximum alcohol content of 14 percent alcohol by volume, which is consistent with the maximum alcohol content for a tax classification for still wine under 26 U.S.C. 5041. Under current and proposed regulations, grape wine that is labeled as “table wine” need not bear a numerical alcohol content statement. Thus, the designation “table wine” on a label serves two purposes—it reflects the class and type designation of the wine, and it reflects the alcohol content for tax classification purposes. Accordingly, under the proposed rule, a still grape wine that contains 14.2 percent alcohol by volume would not receive the benefit of the tolerance to the extent that the wine may not be labeled either as a “table wine” or with an alcohol content of 14 percent or less, regardless of the tolerance prescribed in this section.

4. Subpart F—Restricted Labeling Statements

Proposed Subpart F--Restricted Labeling Statements, includes specific rules for the use of certain statements on labels, including statements regarding allergens, the term “organic,” and other specific statements. The following discussion sets out some of the more important provisions in proposed subpart F that relate specifically to wine.

a. Permit numbers.

Current § 4.39(e)(2) sets forth specific format rules for stating optional bonded wine cellar and bonded winery numbers (for example, “Bonded Wine CellarNo. __” or “B.W. No. __”). TTB believes these format rules are unnecessarily restrictive and proposes to delete them. However, proposed § 4.86 retains the requirement that the permit number appear adjacent to the name and address of the person operating the wine cellar or winery.

b. Use of vineyard, orchard, farm or ranch names.

Current §

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